3 Options for More Business Funding Without Sacrificing Ownership

Friday 18th June, 2021

Starting and running a business has its challenges, one of which is financing. As much as you need enough money to actualise your dreams, you still want to be in control of your vision. However, some financing options out there mean that you have to part with some equity.

The good news is, there are still some ways to get business funding without sacrificing ownership. You don’t have to give away percentages of your company or other rights for the funding agreement to work.

Whether you want an equity investment, a loan, or just some cash, the following list will help you find what you need.

Crowdfunding

Crowdfunding is a form of business financing where an entrepreneur can get money from many individuals through a Kickstarter or Indiegogo campaign or any other crowdfunding platform. It is usually in small donations, which anyone can make with an internet connection and minimal funds.

The entrepreneur sets up their crowdfunding page, and they provide details about what they are trying to do, why it’s important, how much money they need and the business plan. Interested persons can donate or prebuy the products. The idea works best when starting a new business or product line.

Advantages of Crowdfunding

Below are the two key benefits of crowdfunding:

• The entrepreneur has complete ownership of the business.
• It’s easy to start a campaign with little knowledge about how crowdfunding works or which platform would work best.

Disadvantages of Crowdfunding

Below are the main downsides of crowdfunding:

• This form of financing might not be the best choice if your business needs a lot of money.
• You have to create a compelling business plan and buy into people’s emotions.
• You have no control over how much you can get.
• Furthermore, you have to compete with other entrepreneurs seeking funds which means you must have an excellent and convincing business plan.

Grants

A grant is when a government or other institution gives money to an organisation to achieve its goals. It works best when you have a business idea targeting a specific group, such as a marginalised community or a particular gender.

Advantages of Grants

Among the key benefits of grants include the following:

• Usually, there are no strings attached to the grant, but the organisation may require periodic updates on your progress.
• Funds come directly from the grantor’s budget, so you don’t have to worry about fundraising.
• They are awarded based on merit and need without regard for what type of business you have.
• It’s a suitable funding option when your business touches many people: for example, working to solve a social or environmental problem.

Disadvantages of Grants

The ugly side of grants is that;

• Grants have minimum size requirements and come from other organisations’ budgets.
• There might be specific rules you have to comply with to qualify for a grant.
• Grants awarding is competitive. You must be prepared to compete with other applicants. You will also need an effective business plan and strong relationships to get the funding you want.

Small Business Loans

This funding option is widely available and flexible. The process of getting a loan can be quick, especially if you have strong credit or significant collateral like property that could secure the loan.

The interest rates on small business loans are fixed, so your payments will stay stable over time, even with changes in an economic environment.
Small business loans are often structured as lines of credit, and you can borrow up to your maximum line.

Reasons to Consider Small Business Loans

You might find small business loans appealing because;

• There are different small business loan options to choose from, some of which favour new start-ups.
• Some lenders are willing to work with early-stage enterprises.
• The financier might also be ready to invest their knowledge into your business and offer mentorship

Drawbacks of Small Business Loans

Despite their fair share of merits, small businesses have the following shortcomings:

• The interest rates on small business loans are often fixed. Your payments will stay stable over time, even with changes in an economic environment.
• It might be hard to get a financier willing to agree to your specific terms.
• Some banks are not willing to take the risk of financing start-ups.

Other business funding options are peer to peer lending and pitch competitions. Your friends or relatives might agree to loan you the money and have a more flexible repayment schedule. The downside is, not everyone believes in your dreams, making it hard for them to risk losing their cash.