Deciding how to finance your startup in 2023 can be a challenging hurdle to overcome. In the US, 58% of startups have less than $25,000 at their disposal during the beginning phase.

Often traditional methods of acquiring funds via bank loans are complicated and competitive. Processes can be lengthy and are not always guaranteed as banks shy from new ventures and the element of risk involved.

Fortunately, there are lots of options out there. In the guide below we have shed light on some alternative ways you could look to finance your startup this year.

Personal Savings

If you are fortunate to have personal savings of your own, these funds can be the first source of finance for your new business. It can be daunting to use your savings on your startup launch, however if you have money in the bank and believe in your product - go for it!

You could also look to borrow from close friends or family. This is a less formal way to secure money than a traditional bank loan, and often offers a more flexible repayment schedule and is usually interest free. To avoid any relationships turning sour, make sure the terms of any loans are agreed upon in writing, and of course that everyone has a realistic understanding that the business may fail.

Grants

Small businesses are an essential part of the world economy and this is recognised by a number of business grants that exist to provide support to new ventures.

There are government support schemes that target certain business areas which you may qualify for. It might take a while to find a grant that you qualify for, so put some time aside if this is an avenue you wish to explore. There could be great reward for this effort however in being given a lump sum of money to begin your business.

Note that grants might not come necessarily in the form of money - there are other grants that include discounts or business advice which is always worth exploring to save you money.

Crowdfunding

The process of crowdfunding involves many people investing small amounts of money into your business which adds up to the total amount of capital you are looking to raise. Multiple crowdfunding websites have been created in recent years to create a platform for you to promote your idea and hopefully attract interest.

There are a few types of crowdfunding - one way involves giving a reward to those who have invested in your product, such as advanced access to your services or product, whereas another involves giving away a percentage of your company to those who have contributed.

The benefit of crowdfunding is you can begin the growth of your business knowing you have a large pool of people interested in the product and its success.

Angel Investors

An angel investor is defined as a high net-worth individual who can provide funding for startups and new businesses, usually in exchange for some ownership of the company. Often this is a favorable form of investment for new business owners, as the focus is less on profit gain and more on your development as an entrepreneur.

This form of finance can come in the form of one-time support to launch the business, or may be continued funding to assist your startup in the challenging early stages of launching.

There are pros and cons of accepting an offer from an angel investor. A con being that you will lose full ownership of your company. A large benefit is that angel investors are likely to have a wealth of experience in business and a network of contact which could be beneficial to tap into.

By Sumeet Manhas

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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