Considering joining the “startup” world but unsure how to find funding? Whether you’re simply in the research phase or you’ve developed a full blown business plan and have some capital, below are the most common ways new startups, who aren’t yet ready for venture capital, fund their business.

  1. Personal Savings
    Personal capital is the most relied on source by entrepreneurs, according to the Small Business Administration. Many entrepreneurs dedicate a good chunk (or occasionally the whole lot) of their personal savings to their new venture, often relying on family or friends for a little help paying the bills or a place to crash if they find themselves in a bind. However, consider speaking with family and friends before you start to ensure they will be there to pick you up if needed, and always leave yourself a small nest egg in case the venture goes awry.
  2. Credit Cards
    Credit cards are certainly the easiest, but most dangerous, form of funding. They provide easy and quick access to a significant cash flow before founders can give themselves a full salary, but they can also put founders in the hole by losing money to late fees or damaging their personal credit. Be careful about how much you rely on credit cards now, as it could prove to be a major hang-up in your future.
  3. Personal Wages
    Many entrepreneurs take it slow, or develop their business or product on the side, while continuing to work a day job and receive income. This avenue may be the most exhausting, or time consuming, by essentially working two jobs, but may be the most financially viable and more common than many realize. The founder of YouTube, Steve Chen, was still employed at Facebook when he began his video platform venture.
  4. Crowdfunding
    The age of the internet has provided entrepreneurs with a wealth of new resources when it comes to funding. Sites like Indiegogo or Kickstarter allow individuals to raise money by “soliciting” online funders for their product, game or other business. Backers take the risk that they may not be repaid in the anticipated time frame, while founders must be aware that not delivering risks ruining their reputation and their chance for future ventures.
  5. Loans
    Founders can go the traditional route of seeking out a bank or other loan service, or they can consider the newer concept of peer-to-peer online loan platforms like Upstart or LendingClub. Entrepreneurs have many lines of credit or business loans at their disposal, but should take into account the payback of such options, which often include interest.

New business venturers have a bevy of funding possibilities to consider, even if they are not established enough for venture capital funding, but proper planning and multiple financing avenues are always advisable. Talk to family, friends, and trusted financial advisors before jumping into the unknown of owning your own business, and find a funding plan that places you on the path to success.

Jean Miller - Accounting Manager