It isn’t uncommon to see entrepreneurs and small business owners seeking venture capitalists to fund their business. Venture capital (VC) is an institutional or private investment made into new businesses. However, if you are not interested in venture capital funding, here are 8 non-venture capital financing options for entrepreneurs.
8 Financing Options for Entrepreneurs Not Looking for VC Funding
You must explore different funding sources such as a line of credit to grow your company and before raising equity capital. 8 such options include:
- Accelerator Programs And Fellowships
Accelerator programs and fellowships help in supporting entrepreneurs in growing their businesses and increase their likelihood of success. Many fellowships and accelerator programs offer mentors and access to funds. Another opportunity that these present are pitch competitions which are a great source to win money that you can invest in your small business.
- Peer-to-Peer Networks
There are numerous marketplace lending options that have good business term loans and personal lines of credit. This is a good option to consider if you have a good credit rating as you will get lower rates and more advantageous payback options. You can even reach out to friends, family and business associates for alternative sources of funding.
- Purchase Order Financing
If you can leverage contracts, purchase orders and memorandums of understanding (MOUs), you can access debt financing at a cheaper rate. This would be perfect if you can secure purchase orders or legally binding agreements to pay for products or services rendered. Working with Local Community Development Financial Institutions (CDFIs) will enable you to get this funding at lower interest rates than traditional loans.
- Small Business Loans
Talking to your local small business centres and Small Business Administration branch will help if you are interested in small business loans. They are quite entrepreneur-friendly and offer personal loan for businessman. Moreover, they are more lenient in their qualifying standards, which is great for small businesses that are just starting off.
- Pricing And Purchasing Structure: The Subscription Model
A subscription model allows you to charge up front for an increased access to your products or services. You can charge your customers through a subscription model and use the sales to develop other offerings while being able to cover the initial costs. You can have a quarterly, monthly, biannual or annual subscription plans.
- Line of Credit
Applying for a personal line of credit for business is a great option as you have to pay interest on only what you use. You can grow the business without having to give away your equity or control of the business. A line of credit acts as an emergency fund as well.
- Low-Interest Government Loans and Grants
Low-interest government loans and grants are a great option if you want to avoid the VC route. Reach out to the local government contacts like small business development centres, chambers of commerce, and community and economic development offices. These bodies would fund you if you assure them that you can create jobs and make money.
- Trade And Barter
The oldest trick in the book, the method of trade and barter will work if your initial products require funding to establish and grow the company. Look for opportunities to create mutual value through different sponsorships. You can do trading and bartering in kind too, rather than seeking monetary donations. Reach out to companies that have a corporate social responsibility (CSR) departments or local governments that offer opportunities for free resources and technical assistance.
The good news is that it isn’t difficult to get a funding option like a business loan these days. Exhaust your free local resources and try out the above-mentioned strategies to raise money for your business and grow it successfully.
Author bio:
is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at shiv@moneytap.com.
