Five ways to finance your business without taking a loan

Financing has been repeatedly identified as an issue for startup businesses the world over.  Apparently, there isn’t enough money to go around and financial institutions continue to charge exorbitant rates of interest on business loans.  In my own locale, it is significantly easier to qualify for a personal loan over a business loan, any day.

New and existing entrepreneurs are then left in a quandary – where do I find the funds to start my operations? And having started, how do I now finance my business in the growth stage?

Well, there are several ‘new’ types of financing options now available to both startup and growth stage businesses.  Among them are Angel Investing, Venture Capital, Crowd Funding and Grant Funding and Equity Funding.  These options are among a slew of others.

If you are doubtful about where to access funding for your startup, the following are five ways to finance your business without taking a loan.

Image courtesy of www.jamaicaobserver.com

1.       Angel Investment – Angel Investment is provided by affluent individuals who invest capital into startups in exchange for ownership equity. Some angel investors invest through crowd funding platforms online or build angel investor networks to pool in capital.

2.       Venture Capital - Venture capital is financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. For startups without access to capital markets, venture capital is an essential source of money. Risk is typically high for investors, but the downside for the startup is that these venture capitalists usually get a say in company decisions.  

3.       Crowd funding – This is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.  More non-traditional businesses such as Musicians, Artists and Film-Makers frequently use this method. 

4.       Grant Funding – Grants are non-repayable funds or products disbursed by one party, often a government department, corporation, foundation or trust, to a recipient, often (but not always) a nonprofit entity, educational institution, business or an individual. 

5.       Equity Funding - Equity funding is an umbrella term that refers to any means of financing your company in which you receive money in exchange for issuing shares of your stock. There are multiple methods for raising equity capital, but, depending on how you raise this money, you could be giving up anywhere from 1-100% of your business.

Source (Definitions s: www.investopedia.com; www.smallbusiness.yahoo.com en.wikipedia.org