Three Main Ways to Fund Your Business

You’ve done it—come up with an amazing idea that would solve a major problem for your target audience, built your team, and your business is off to a great start. You may have even quit your 9 to 5 to focus solely on your new endeavor. You hit a roadblock that most businesses encounter: you need more funds—a lot of funds. Many entrepreneurs got their initial funding from friends and family, but for most people, especially people of color, that unfortunately isn’t an option.

These are the three main ways of funding your business:

Self-funding: Using your savings, earnings from your day job, or other income to fund the business, without other significant sources of funding. 

Debt financing: This is when your company goes into debt in order to get the funding it needs. This is accomplished either by taking out a loan, typically from a financial institution, or issuing bonds. Both have certain limitations, and one or the other may not be available or the appropriate option.

Equity financing: This is when partial ownership of a company is sold to either an one or several individual investors (wealthy people who make a practice of making money off of investing in companies) or venture capital firms, who exist to invest in and develop companies.

As an honorable mention, one additional method of funding a business that has become increasingly popular is crowdfunding. Here, companies use a platform to describe their product and company and ask the public to contribute money in support of a goal or purchase the product in advance. This provides the cash necessary to actually manufacture the product, allowing the company to cover its expenses before having to spend money.

Deciding which of these methods are best for you may be an overwhelming and complicated task. ARS Counsel is here to advise you through every step of the process. Click here to get in touch.