The Different Types of Business Funding: A Basic Guide

Getting your business off the ground is easier said than done. It requires more fees than one can expect to pay out of pock. This is where business funding can come into play.

It is a great way to get your salary covered while you work on getting your business going.

Here is everything you need to know about the different types of business funding.

1. Out-of-Pocket

While going with your own savings account is the best way out of all the small business funding options out there to stay out of debt, it is not necessarily the best option.

An out-of-pocket funding model can usually lead to emergencies happening outside the business that you can no longer pay for. While it is satisfying to say that you paid for everything out of your pocket, it is not recommended.

2. Grants

Grants are a blessing when it comes to funding options. This is money that is provided by the federal or local government to help get your business going.

Not only do they provide money, but this money does not typically need to be paid back. Rather, the government benefits from the taxes that it will collect when your customers start coming in.

3. Loans

Business loans are the standard way to get funding for a business. If you don’t have any grants available to you, be sure to check into loans.

Loans are recommended even if you have all the expenses covered with a savings account. This shows a bank or financial institution that you are trustworthy with your money and can help extend your companies line of credit with them

If an emergency comes up, you’ll still have your savings account to cover the emergency, while the loan takes care of the business.

You can find the best rates for loans by clicking on the link.

4. Crowd-Sourced

If you’re more product or service-based, you can try crowdfunding. By using companies like Kickstarter or GoFundMe, you are essentially getting preorders for your company before you even have the concept fully realized.

The promise is to deliver on those that pledge money once the product or service launches.

5. Angel Investors

Angel investors are essentially just that, investors. These are individuals who are giving you the capital or funding that is needed to get going with your small business.

In exchange, they often ask for part ownership of the company. The other option is to have you pay back the investment over time. There are certain angel investors that will simply say don’t worry about it and just give you the money.

Business Funding Can Be Easy

Getting business funding doesn’t have to be limited to any of these avenues. You could secure a loan, receive a grant, and still use crowdsourcing to get everything going. Consider what options work best for you and your company and make the decision from there.

If you want to learn more about the business world, be sure to check out the rest of our blog. If you know someone that is considering starting a business, be sure to share this article with them.