Many starting out in business don’t realize that there are more than 20 funding sources available to raise the money needed to fund a business vision, idea or project. The sources fall into two main groups, Bootstrapping and Equity Financing.

Bootstrapping is when you, the entrepreneur, decide to do it only using resources on the ground, from personal savings to second mortgages. Equity financing is when you, the entrepreneur, decide to give up a percentage of ownership of your business in exchange for the necessary capital.

Bootstrapping Early Sources:

1. Capital of the Founders

2. Savings

3. Credit cards

4. Second Mortgage

5. Risk lease

6. Sales income

Bootstrapping from later sources

1. Lines of credit

2. SBA Loans

3. Asset-backed loans/accounts receivable factoring, etc.

4. Corporate Strategic Alliances

5. Banks that lend to startups

6. Government grants (eg, SBIR, DARPA)

7. Company earnings

Under Equity Financing, depending on the source, one may have to give up 25%-75% ownership of the company. This generally depends on the nature of the deal and what can be negotiated. In Equity Financing you should also be aware that there are early stage and later stage sources.

Early sources of equity financing

1. All Bootstrapping First Sources

2. Friends and family

3.Angels

4. Groups of angels

5. Early-stage venture capital firms

Equity financing Subsequent sources

1. All boot sources

2. Venture capital firms

3. Corporate venture funds

4. Private equity firms

5. Private Placement Companies

6. Mezzanine financing companies

7. Investment Banks

8. Public Markets

To make a sound financial decision, make sure your business plan is solid and paints an accurate picture of your business idea or project. The Proformas and Valuation of the business must be honest and realistic. Angel investors and venture capitalists will only back ideas and companies that will deliver the safest and strongest return on investment (ROI).