Startup financing is a huge consideration and an important decision for any aspiring entrepreneur. There are plenty of ways to fund a business, and whether you borrow money, dip into your savings or go another route, you need to understand your options before you choose.
While these are far from the only ways to finance your startup, here are three of the most popular methods today’s entrepreneurs choose.
The notoriously high rejection rate of bank business loans combined with the proliferation of online lenders has made traditional business lending seem like it’s not even worth the time and effort. But plenty of small business owners still turn to local and national banks, as well as the Small Business Administration (SBA), to help them finance their operations.
Alternative lenders provide quicker, smaller, more flexible loans through an online application and transfer process. Depending on your credit score, you can be approved for a loan in a matter of minutes and have your money in just a day or two.
Funding your business out of your own pocket – commonly known as bootstrapping – is the simplest but potentially most difficult financing route. On the one hand, you are in total control of your finances; you don’t have to make any payments to lenders or share equity with investors. On the other hand, you’re on the hook for every penny you sink into the company, and if it fails, your personal funds are going down with it.
Tens of thousands of startups have turned to venture capitalists and angel investors to get off the ground, and their ranks are only increasing. A Gust2016 report on startup funding saw the number of funding applicants submitted in the second half of that year increase almost 6 percent from the same time in 2015.
In an age when new Kickstarter and GoFundMe campaigns emerge every day, crowdfunding is quickly becoming a go-to option for businesses that want to raise money without the pressure of formally pitching investors. Success stories of entrepreneurs who raised tens of thousands – even hundreds of thousands – of dollars in just a few weeks seem to be a dime a dozen.