Early Funding 101 pt 1
Starting a business is exciting, but funding it can feel overwhelming. The good news? There are multiple ways to secure the money you need to get started. We’re going to break down common and practical funding methods, so that you understand your options and can pick what works best for your goals. In this part 1, we’re focused on early funding that doesn’t include investments. Stay tuned for part 2 if you’re interested in VC, angel checks, accelerators, and more.
Bootstrapping
Bootstrapping means funding your business with your own savings or income. It keeps you in full control, but requires careful budgeting and planning. Bootstrapping isn’t easy and it may take more time this way, however, we’re big fans of bootstrapping for several reasons. Slow and steady wins the race and in this case slow and steady wins customer loyalty. Having a lot of capital is awesome, don’t get us wrong, but when you have a smaller budget you aren’t able to throw money at issues and you’re forced to really learn your userbase. And, again, you keep full control! Note: just because you begin by bootstraping doesn’t mean that you can’t one day raise funding. Actually investors look fondly on bootstrapped companies because it often points to conviction and a deep understanding of your market.
Who It’s For: Entrepreneurs with manageable startup costs or those testing a concept before seeking outside funding.
What to Know: This approach can limit your growth speed, but keeps you debt-free and independent.
Grants
Grants are essentially free money awarded to businesses or individuals for specific purposes. The catch? They’re highly competitive, and you usually have to meet specific criteria or use the funds in a particular way. A lot of major companies have grants (Sephora, Famous Amos Cookies, Tory Burch, etc.). It’s hard to keep track of every site with a grant so we recommend using platforms that do the dirty work for you. We’ve listed some of our favorites below:
Grants.gov
Hello Alice
Capital Klub
Institute for Women's Entrepreneurship at Cornell
Who It’s For: Businesses tackling social, environmental, or innovative challenges often qualify for grants from government agencies, nonprofits, or corporations. Grants also often target certain demographics or markets. A major beauty brand may have a grant for up and coming beauty brands or a DEI conscious corporation may have a grant for POC business owners.
Loans
Loans are one of the most traditional ways to fund a business. A lender gives you money upfront, and you repay it over time, with interest. Its important to note that when you’re first starting out, your business doesn’t yet have a credit score and so your personal credit score will be considered to determine credit worthiness. In order to build your business credit score you’ll need to be incorporated, have an EIN (as discussed in ’Administrative Details,’ and have a business bank account. Once all of that is settled you can apply for a free D-U-N-S Number through Dun and Bradstreet (D&B). Many lenders and vendors report to D&B as well as Experian and Equifax.
Types of Loans:
Bank Loans: Best for established businesses with a solid credit history.
SBA Loans: Backed by the government, they offer lower interest rates and better terms for small businesses.
Personal Loans: Smaller loans under your name. Not your company name.
Who It’s For: Entrepreneurs with a clear business plan and the ability to make regular payments.
What to Know: Missing payments can damage your credit score and put your assets at risk if the loan is secured. If you aren’t 100% sure you can make payments we strongly encourage you to pursue other early funding options.
Crowdfunding
Crowdfunding lets you raise money from a large group of people, typically through an online platform. In exchange, backers might receive a product, service, or equity. Crowdfunding is a good option for artists, non-profits, and creative endeavors that may not be eligible for other forms of funding
Options:
Kickstarter
Indiegogo
Wefunder
Crowdfundr
Who It’s For: Entrepreneurs with a compelling story, a clear offering, and the ability to market their campaign effectively. You have to appeal to everyday consumers, not investors who may have a higher risk tolerance.
