How to get funding for a business: 13 vetted ways for 2024

When expanding your business, one of the biggest challenges is getting funding. From renting office space to buying goods and hiring staff, running your business requires money and investments.

Whether you’re looking to grow or to put a new small-business idea into action, you might find funding is possible without visiting every bank around. Here are 13 ways to fund your small business.

1. Bootstrapping
2. Crowdfunding
3. Angel investors
4. Venture capitalists
5. Government programs
6. Loans
7. Purchase order financing
8. Vendor financing
9. Friends and family
10. Contests
11. Product presales
12. Incubators
13. Corporate programs

1. Bootstrapping

Type of funding: Self 

Bootstrapping is one of the funding sources that many business owners choose when starting their venture. In fact, 73% of business owners plan to self-fund their business this year. When you bootstrap, you use personal funds, such as savings or credit cards, to jump-start your business.

Bootstrapping allows business owners to maintain full control and ownership of their company. 

Bootstrapping is also a way to test how successful a business idea is without relying on outside funding. Using personal funds, you can prove the concept and validate its potential for success. While bootstrapping can be an effective funding option, it can limit the scale and speed of business growth.

2. Crowdfunding

Type of funding: Self 

Crowdfunding involves raising money from a large number of individuals who contribute small amounts. They allow business owners to showcase their business ideas and goals. 

Crowdfunding platforms serve as intermediaries that connect businesses with potential backers. These platforms can provide different types of funding than other avenues, and can often be faster. 

Launching a successful crowdfunding campaign involves several key steps:

1. Create a compelling pitch: Clearly communicate the idea, its potential impact, and the planned use of funds. A well-designed campaign page with visuals and videos can further engage potential backers.
2. Set a realistic funding goal: Align the goal with the business’s financial needs while being attainable within the specified time frame.
3. Promote the campaign: Find and attract backers on various channels, including social media, email newsletters, and personal networks.

Note that each platform may have its own specific focus, such as creative projects, technology innovations, or social causes. Popular platforms include Kickstarter and Indiegogo.

3. Angel investors

Type of funding: Equity 

Angel investors are generally individuals (or a group) who provide financial backing and support to startups and early-stage businesses. They typically invest their own money and are often experienced entrepreneurs or business professionals. Angel investors are one of the key types of funding for startups, but they also usually take an equity stake in the company. 

Angels typically take more risks on innovative and unproven business ideas. To attract the attention of angel investors, business owners should have a pitch showcasing their unique selling points, market potential, and growth strategy.

4. Venture capitalists

Type of funding: Equity funding 

Venture capitalists also invest in companies in exchange for an equity stake. However, they tend to be firms and invest more than angel investors. They often invest in industries with high growth potential, such as technology. 

Venture investors are another type of funding for startups, where, unlike traditional funding sources, venture capitalists are willing to take risks on innovative and unproven business ventures.

When considering potential investments, venture capitalists evaluate a variety of criteria. They look for companies with a strong management team, a scalable business model, and a large addressable market. They also typically seek companies that have achieved some level of success, such as generating revenue.

5. Government programs

Type of funding: Government 

Government programs offer various ways to fund a business such as grants, loans, and tax credits. Eligibility for government programs often includes factors such as the industry and potential impact on the local economy.

Here’s a look at common government funding options:

• Government grants are nonrepayable funds awarded to businesses for specific purposes. These grants can be for research and development, market expansion, or environmental initiatives.
• Government tax credits incentivize certain business activities and can help offset costs related to research and development, energy efficiency, or hiring and training employees.
• Loans from government agencies tend to have lower interest rates and more flexible repayment terms than traditional bank loans. Government loans can be for various purposes, including purchasing equipment, expanding facilities, or covering operational costs.

One of the most popular government loan options is the Small Business Administration (SBA). The SBA offers a variety of loan programs to small businesses, including loans for startups and expansions. 

6. Loans

 Type of funding: Debt 

Small business loans are a popular funding option for businesses looking to invest in new equipment or locations. There are different types of loans with differing eligibility criteria and repayment terms. Here are the two most common types: 

• Traditional loans from financial institutions, such as banks, are a common choice for many business owners. These loans often require a comprehensive business plan, a solid credit history, and collateral. The loan amount and interest rate depend on factors such as the business's creditworthiness. 
• Lines of credit provide businesses with access to funds up to a certain credit limit. This type of loan allows businesses to withdraw funds as needed, providing flexibility. The lender will determine your credit limit using the business's credit history. 

Online lending is also an option, offering an alternative to conventional banks. 17% of business owners plan to use this method to fund their new business this year.

7. Purchase order financing

Type of funding: Debt 

Businesses can use their purchase orders from buyers as collateral to get funding. This type of funding benefits businesses that lack the working capital to fulfill large orders.

Here’s how purchase order financing works:

1. A business receives a large purchase order and approaches a purchase order financing company.
2. The financing company evaluates the buyer’s creditworthiness and the transaction’s profitability.
3. The financing company provides the necessary funds directly to the supplier or manufacturer to fulfill the order.
4. The buyer pays for the goods, and you get the remaining funds after paying any fees and interest to the financing company. 

Purchase order financing offers several advantages for businesses. It allows them to take advantage of large orders that would otherwise be challenging due to financial constraints.

8. Vendor financing 

Type of funding: Debt 

Vendor financing allows businesses to obtain funding by leveraging supplier relationships. It’s also known as supplier financing or trade credit. This funding option is particularly relevant for businesses that need capital to purchase inventory or raw materials.

Here’s how vendor financing works:

1. A business needs funding and negotiates with its suppliers to extend payment terms.
2. Instead of paying upfront for their purchases, they can defer payment for a certain period, such as 30 or 60 days.
3. This creates a cash flow buffer for the business, as they can sell the purchased goods and generate revenue before paying the supplier.
4. The terms and conditions of vendor financing vary depending on the agreement with the supplier. Some suppliers may charge interest or fees.

Vendor financing is useful for industries where inventory or raw material purchases are significant, such as manufacturing, retail, and wholesale. For example, a clothing retailer may negotiate with their garment supplier to defer payment until selling the products to customers. This enables the retailer to stock up on inventory without depleting their working capital.

By extending payment terms, businesses can manage cash flow and secure needed inventory or materials.

9. Friends and family

Type of funding: Self 

Seeking funding from friends and family is an effective way for many entrepreneurs to get their businesses off the ground. In fact, 24% of new business owners plan to start their business using this method. However, you’ll want to approach these relationships with professionalism and transparency.

When asking loved ones for funding, treat the process as a formal business transaction. Have a business plan that outlines your vision, goals, and financial projections, as well as a contract or something in writing.

Be open and honest about the potential risks and rewards of investing in your business. Clearly explain the possible outcomes, including the possibility of losing their investment. Providing this information upfront can help avoid any misunderstandings.

10. Contests

Type of funding: Self 

Contests and competitions allow you to showcase your ideas and potentially win financial support. Participating in business contests typically involves an application process. Some contests may require an elevator pitch or presentation, where you pitch your idea to judges or potential investors.

These contests can be a valuable way to get funding, but even if you don’t win, you can gain exposure and get networking opportunities.

11. Product presales

Type of funding: Self 

Product presales allow business owners to generate revenue upfront. Presales means you’re selling your product before you actually make it or produce it. 

This method, also known as advance payments, allows you to validate your idea before investing in production. It’s one of the great ways to fund a business, and it reduces the risk of financial loss.

Conducting successful presales campaigns requires careful planning and execution. Here are key strategies to consider:

• Build anticipation: Create a buzz around your product by teasing its features and benefits. Use your email list or other marketing channels to generate excitement and attract potential customers.
• Offer incentives: Provide early adopters with exclusive incentives, such as discounted prices, limited edition versions, or additional perks. These incentives encourage customers to commit to the presales, boosting upfront revenue.
• Leverage social media: Utilize social media platforms to reach a wider audience and engage with potential customers. Share sneak peeks, product updates, and customer testimonials to build trust and encourage presales.
• Communicate value: Clearly communicate your product’s value and unique selling points. Show potential customers how you can improve their lives or solve their problems with your product. 

Business owners use presales to secure funding and gain insights into the market demand. They then use that revenue to fund production and further marketing.

12. Incubators

Type of funding: Equity 

Incubators are programs that provide resources to help early-stage businesses get off the ground. One of the main benefits of joining an incubator is access to physical space, office equipment, and technology. It also allows businesses to focus on their core business operations.

Incubators generally require you to submit an application and provide details about your business, such as a business plan. In addition to resources, incubators provide mentorship from experienced professionals. These networks can open doors to new opportunities, partnerships, and funding sources.

13. Corporate programs

Type of funding: Equity 

Large corporations utilize corporate programs to invest in businesses to bring new ideas and technologies into their business. Like incubators, they offer resources like mentorship and office space. To be eligible for funding through corporate programs, businesses usually need to meet certain criteria:

• Industry focus
• Stage of development
• Revenue potential
• Alignment with the corporation's mission or goals

In return, you may have to give the company a stake in your business or agree to certain terms, such as exclusivity or noncompete clauses.

Best ways to prepare for raising money 

Depending on the ways you take, there are a few steps you should work through before hitting the pavement, such as: 

1. Write your business plan: You’ll need a solid business plan to win investors over. Your business plan should have details about marketing and finances. You should include an executive summary and competitor analysis, like a SWOT analysis. 
2. Understand your financial needs: Before asking for funding, you need a clear picture of your financial needs. Take the time to calculate your expected overhead and potential costs. The minimum amount of money you need to start your business depends on your industry, working capital, taxes, and where you operate. When building your financial projections, focus on your sales forecasts and expense budgets.
3. Rehearse your pitch: It’s time to prepare the pitch you’ll use to convince investors to fund your business. In general, you want your pitch to be around 45-60 seconds long—about the length of an elevator ride between floors—hence the term “elevator pitch.” 

You can always rely on friends, family, and mentors for feedback. Once you have your pitch in order, you can record yourself making the pitch. You don’t have to post it on social media, but you can use the recording to see opportunities to improve.

Tips for minimizing your startup costs

When starting a business or deciding to scale up, you can lower the amount of capital you need by minimizing your costs. Here are five practical tips and strategies to help you minimize your startup costs:

1. Plan and budget: When launching or growing your business, create a business plan and budget. This will help you determine your funding needs and identify areas where you can reduce spending. You can use free budget templates to help get started. 
2. Embrace cost-saving measures: Look for innovative ways to cut costs without sacrificing quality. Consider options like purchasing used equipment versus new. 
3. Utilize virtual office space: Instead of leasing traditional office space, consider using virtual or coworking spaces. These options often provide flexible leasing terms at a fraction of the cost. 
4. Hire freelancers or part-time employees: Rather than immediately hiring full-time employees, consider utilizing freelancers. This can help you save on salaries, benefits, and other employee-related costs, while still getting the necessary work done.
5. Leverage technology: Take advantage of technology tools and software that can streamline your operations. This can reduce the need for manual labor, optimize processes, and save costs in the long run.

By implementing these strategies and being mindful of your expenses, you can increase your chances of long-term success. Remember that every dollar saved at the beginning can make a significant difference in your business’s growth and profitability.

Run your business with confidence 

After researching these 13 methods and unique ideas on how to get funding for a business, spend time investigating the terms and conditions of each to make sure they fit your business. 

On top of that, you need to ensure your finances are stable before reaching out for funding. Online accounting software like QuickBooks ensures you can easily create financial reports to show your business is on the right path and manage your business finances with ease.