Business funding can come from a variety of sources, not just traditional banks. In fact, we have gathered six alternative business funding sources below.
See which small or startup business funding is the best option for you, your business needs, and your goals. And if you end up choosing alternative business funding through Probably – learn more about how we work, our fast and simple process, and why we can say ‘Probably, Yes’ to your business funding needs!
1. Dip Into Personal Savings
Though this is not an option for everyone, many startups or small business owners can fund their company on their own. In fact, this is the top funding source for small business startups. If you have money saved up, you could use it to start your small business.
This option is risky as you could lose your investment if your business is not successful, and have no savings to depend on. However, you will not have to pay any interest or fees, which is appealing to many startups who are trying to keep overhead low.
2. Borrowing from Friends & Family
Friends and family are the second most popular startup funding source – and this makes sense as you can get gifts, funds, and loans from multiple people, making the burden less on each.
However, though the business funding source is coming from multiple people instead of just one account, there are similar benefits and risks. Most likely, you will owe less in interest (if you end up owing any interest at all) but you may also lose money that isn’t yours and leave those close to you without a safety net in their savings account.
3. Find a Venture Capitalist
Venture capitalists are firms that are actively looking to invest in small businesses and startups. This means they are potential investors for you and could be a great source for business funding.
Venture capitalists invest in the early stages of a company in exchange for an equity share. So if you do not want to give away a portion of your business in exchange for startup costs, then this might not be the right option.
However, if you are willing to share a portion, then your VC may also be able to help with other resources or connections, as they want you to be successful so they get a good return on their investment.
Additionally, since venture capitalists are looking to get a fast and high return on their investment, it is unlikely you will get chosen if you are not in an industry with rapid growth. Industries like biotech, software, medical equipment, information technology services, and media are growing quickly and therefore more likely to get picked up by a venture capitalist.
4. Try Traditional Investors
An investor is different from venture capitalists, though ultimately they are both outside sources of business funding who exchange investments for stakes in your business. Sometimes called ‘angel investors’, these individuals usually take an equity share of your startup in exchange for their business funding.
Instead of a firm, usually investors are individuals and entrepreneurs or former entrepreneurs themselves. Another difference from venture capitalists is that many ‘angel investors’ may be genuinely interested in your industry or business, instead of only looking to industries that are currently booming.
5. Try for Business Funding from the Big Banks
Though this is what many immediately think of when looking for business funding, big banks are notorious for not funding small businesses or startups as they don’t have enough data to back up their risk.
If a big bank denies your small business loan application or startup funding request, you could try other banks and financial institutions, or you could look into lenders who are specific for your needs – like Probably.
We aren’t a big bank, and we won’t deny you just because you don’t have years of financials to show us. And because we believe in the power of small business in America, we believe in helping small businesses grow and helping startups launch!
6. Fund from Many with Crowdfunding
There are many crowdfunding websites now, from Kickstarter to AngelList, CrowdFunder to Fundable, crowdfunding is becoming a popular way to expand, start, or fund your business endeavor.
And in case you are a crowdfunding naysayer, see the below example:
In 2012, a company called Oculus Rift launched a campaign on Kickstarter with a goal of $250,000. They had plans to produce virtual reality headsets and ended up raising $2.4 million instead of their original quarter-million goal. That extra money pushed them to quick success and the booming growth of the company. Then, just a couple of years later, Facebook bought Oculus for $2 billion!
However, crowdfunding doesn’t always work so well, especially if you aren’t lucky enough to be one of their ‘viral’ companies who get found and donated to. Additionally, money doesn’t equal success, as some notorious Kickstarter campaigns have raised more than their goal, but still folded due to competition, management, or economic troubles.
7. Work with Others by Partnering
Getting a strategic partner for your startup company can help quicken the growth and development of your business. In fact, almost four out of five companies cite partnerships as a significant part of their growth.
But why? Well, to start, your partner has a bank account. Additionally, instead of one head, one bank account, and one group of connections, working with a partner doubles all of your assets and connections immediately.
However, if you are doubling your business’ funding and assets, and halving your liability…you are also halving your potential profits, as both risk and benefits are split. This is why working with a partner who can bring something to the table, as well as one you trust, is paramount.
Contact Probably for Small Business or Startup Funding
Most banks refuse to consider startups or new businesses, but Probably will work to help you grow regardless of your age. Because every business was new at one point in time, and none of them would have made it if it wasn’t for someone funding and believing in them!
We know that not everyone has the personal savings or friends and family bank accounts to rely on, most people won’t get found and chosen by a venture capitalist or angel investor, and big banks are notorious for denying applications. And though crowdfunding is an innovative new way for entrepreneurs to fund their business ideas, most don’t get the funding they need there either.
One sure-fire way to get the business funding you need, whether that be a startup or small business loan, working capital loan, or equipment financing, is through Probably. Because we work hard to be able to say ‘yes’ when the banks and other business funding options say ‘no’.
Contact Probably today to learn more about our small business and startup business loans and alternative funding options!