Startup founders work hard to lay the groundwork for a successful business. And they don’t want to sacrifice equity to bring their business to life. Fortunately, founders can tap into funding sources that don’t force them to give up a stake in their company.
If you’re a founder seeking money, you’ve come to the right place. In this guide, we’ll unpack financing options that meet your fiscal needs and risk preferences. Keep reading to learn how you can choose the best funding options without giving up equity.
Tap into Existing Savings
Before searching for other funding sources, assess your current savings. Ideally, you’ll want to be reinvesting profits back into your business, especially in the early stages. But you may also have some savings that could help you finance critical needs, like supplies or new equipment for a coffee shop or printing business.
Using your own income and savings can free you from contracts and repayment obligations. You’ll also have full control of your decisions. And you’ll be able to avoid large debts.
On the downside, you may not have as many opportunities for growth when you’re relying on your funds. You’ll only have available what you can realistically afford, given your business plan projections, revenue, and hiring needs.
Look into Traditional Business Loans
When you’re seeking money, traditional business loans may make the most sense. You can secure loans online or through banks, and terms and conditions tend to be reasonable. In other words, you won’t be dealt a hefty interest rate or condensed repayment plan.
Specifically, startup founders can benefit from the lenient terms of SBA 7(a) loans to fund equipment or working capital. These loans offer competitive interest rates and longer repayment options that can help new businesses. Check out this guide to have the SBA 7a loan explained in detail.
Explore Revenue-Based Options
If you need cash and don’t want to sacrifice equity, revenue-based financing can be a good solution. You’ll gain instant capital, but you’ll need to pay a fixed percentage of your revenue until you pay off the loan. That means the payment amount can change depending on how much revenue you pull in.
Revenue-based financing is ideal when you’re feeling confident about business consistency. But be aware that you could take longer to make a full repayment if revenue dips.
Access Grant Programs
You may be able to find financial support through grant programs sponsored by nonprofits or government entities. Best of all, with a grant, you won’t need to repay anything. You will, however, need to use the funds exactly as specified by the grant program.
Know that grant programs can be competitive. And you’ll need to invest a lot of time into preparing a solid application.
Find the Best Funding Option
With several different funding options, you’ll want to select ones that align with your needs. You may want to stick with savings or apply for grant money, especially if you’re a young business. If you’re a little more established, try traditional business loans or revenue-based options.
When you make the right funding choice, you can help your business flourish without sacrificing control.
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