Before You Look for Investors – Consider These 3 Alternative Funding Sources


Whether you are just starting out in your business, or you have an established business, you need funding. Many companies get caught up in seeking money through angel investors and venture capitalists, but going that route means you have to give up part of your company.

Do you really want to part with precious equity?

Not to worry, we have three alternative funding sources you may want to consider.

Why Should You Consider These 3 Alternative Funding Sources?

Why should you consider alternative sources for funding?

Well, it boils down to keeping all of the equity in your business. If you don’t like the thought of bringing in another person who would have a say-so in major decisions, not to mention having to split up the ownership, then seeking alternative funding sources that don’t involve investors may be the right choice.

Alternative funding sources give business owners freedom. Now, this is not to say seeking traditional investors is a bad thing to do, but it may not be the right choice for every business.

Our List of 3 Alternative Funding Sources

There are three main routes you can take. Each depends on where you are in your current business. These options are not one-size-fits-all. What is best for an established business may not be the best for a startup, and vice versa.

However, no matter where the progression of your business is, you should check out these options.

Have some time to spare? There’s an option for that. Do you have a network of peers waiting to help you succeed, but you’re unsure how to tap into that resource? Yep, there’s an option for that.

Maybe, you are well established in your business model, but an untimely invoice process ties up your cash. Need that cash fast? Believe it or not, there’s an option for that, too.

Small Business Loan

If you have a little time and patience, a small business loan through the Small Business Administration (SBA) may be a good fit. While this is a bit more of a traditional route for small businesses, there is something to be said about utilizing programs available to you.

This federal program gives banks incentives to fund small businesses. While this is debt, SBA loans typically have better rates and go through regular financial institutions. These loans can support a variety of needs, from capital to equipment to property. Also, because the SBA is a federal program, special consideration is given to businesses owned by women or minority owners.

As mentioned previously, you need some time to go this route as the application process is more cumbersome than the other options. Of course, loans are also dependent on creditworthiness, and a small business loan requires approval from not only your lender, but also the SBA.

Small business loans are not a good fit if you require cash flow fast or if you would prefer not to go into debt.


In recent years, another popular option for funding sources outside of traditional investors is crowdfunding. Using websites like Kickstarter or IndieGoGo, an entrepreneur can launch a funding campaign promising rewards to donors, rather than equity. Often those rewards can be in the form of presales of a product.

If your business is in a place to offer pre sales of a product, this is an excellent fit. But, it only works well if you can keep up with the production demand.

This option also requires a level of customer attention and communication that is a bit different than the other two options. This social requirement can be somewhat cumbersome, depending on your business focus and needs.

Another hurdle with crowdfunding is the required networking. Getting a campaign to go viral is no easy task. This funding source requires a large number of supporters to make an impact.

If you are fortunate enough to have a substantial amount of contacts, a compelling product or idea, and the customer service, communication, and marketing skills needed, crowdfunding may be a viable option.

Invoice Factoring

For established businesses that need some liquidity, invoice factoring may be the best fit. This funding source is a means to get cash flowing fast.

Ideally, this works for a business with an established client base. If you have cash held up in unpaid invoices, and you need to close the gap that exists between services rendered and payment received, this may be the option for you.

The way it works is simple. Your business will enter into an agreement with a factoring company that buys your outstanding invoices. The factor then pays you a percentage of what you invoice your customer. When your customer pays the invoice factoring company, you receive the rest of the payment, minus a service fee.

Invoice factoring reduces the wait for your cash from a few weeks to a few days in a way that doesn’t put your business in more debt or immediately throw you into the production weeds. This option is also not dependent on your creditworthiness, which is good for companies with less than stellar credit.

It’s important to be mindful that not all invoice factoring companies are the same, so watch out for those taking advantage of your business need. Read the contract for hidden fees and watch those rates. But, with due diligence, this can be an excellent option for companies who need to convert invoices to cash quickly.

You Can Find the Best Solution for Your Business

When you consider these three alternative funding sources, take inventory of your business needs and financial hurdles. While you may be in a place that would attract some great investors, weigh out the pros and cons of bringing in another “boss.” If the thought is daunting, explore the options outlined here.

It is your business, after all — your dream. Nothing says you must do it one way or another. Sometimes the non-traditional route can take you farther than you ever imagined.

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