Starting a business requires capital. One of the most significant decisions made in the early stage of business development is raising the money needed. There are many ways to finance business.
Many founders use short-term sources such as friends and family or bootstrapping (self-funding) to get businesses off the ground in the beginning stages. But they soon find that these measures are not sustainable in the long term, as they only provide a minimal amount of cash flow. Alternatively, some businesses find themselves with rapid growth rates and in need of large sums of money to continue to scale at high speed. They then turn to equity investors such as Venture Capital options, which typically make equity investments in the million-dollar range.
But what about the growth between these two stages of securing capital? Some companies find themselves needing more than what friends and family can supply. However, they do not intend to trade equity or give up full control of their business, or they simply require smaller investments. In this case, there are several non-dilutive alternative funding sources available.
Grants are a way to receive funding without having to repay anything in return. Applying for a grant is a great way to connect with seed investors who desire to partner with a specific business type, such as women or minority-owned businesses.
This method is a way to raise money through smaller donations from multiple investors, otherwise known as crowdfunding. These individuals do not receive equity in the company or a return on investment. They typically choose to invest to receive a bonus such as an extra exclusive product or first access to availability.
Arguably the most creative of options, contests allow founders to receive funding based on pitching their vision or business plan. Pitching contests can involve cash prizes, advice, or opportunities for business partnerships. This funding source is not the most reliable. Still, it is an excellent opportunity to network and meet potential investors, specify the business plan, and practice giving a pitch.
Small Business Loans
Though many traditional banks are unwilling to open a line of credit for a startup company without a proven history of growth, it is possible to find specific lenders who specialize in funding small business startups.
Local credit unions may also be willing to take a risk with a startup when well-known corporate banks may not. This method of funding may require more research or legwork than simply sending in an application. However, it is an option worth considering since small business loans do not require that a founder give up any equity.
Revenue Based Financing
Of all the options to secure seed funding without equity involvement, Revenue Based Financing is the most reliable and widely available. It does require some history of monthly recurring revenue (MRR). Still, for a business that is doing well after funding from these mid-sources and needs an extra boost in business, RBF is the natural next step.
It is relatively easy to secure after submitting the right paperwork, unlike seeking and convincing an angel investor in Silicon Valley. And RBF does not require that any equity is given up, like in VC financing.
At RevTek Capital, we seek to help you raise capital without giving up equity. This is achieved by growing and funding your business through the lowest cost of capital available. We provide quick solutions for funding early-stage growth, as well as advice and guidance from knowledgeable entrepreneurs to help reach your business goals.