Alternative Funding Options for Startups

Startups require funding. From developing your product or service and getting your business off the ground to paying your first paycheck and purchasing inventory, there are myriad of things that require capital along the way.

While bank financing is always an avenue you could try, it might not come to fruition because banks are very cautious about lending to small businesses. So, here are some creative alternative funding solutions that just might work.

Personal financing

One of the best ways to finance your startup is with your savings. With no strings attached and no interest involved, it’s a practical way to set up shop. However, there are some limitations. For example, you might not have all the capital you need, and to risk your savings for a venture that may or may not be profitable is always a gamble. That said, by plowing some of your finances into your business, you can prove to investors that you have some ‘skin in the game.’

Professional Liability Insurance

Since the economic landscape is increasingly becoming more competitive, investors, banks, and lenders typically prefer to finance those entrepreneurs whose businesses are insured. Professional liability insurance, also known as errors & omission insurance, is important for businesses that provide services or advices to customers. Professional liability insurance is a great way to safeguard your business against claims resulting from alleged negligence or error in the delivery of your service . With this comprehensive coverage, you will enhance your opportunities of securing finance for your endeavor. 

Credit lines

Many startups have been built on the back of credit. Depending on your personal credit history, you might qualify for a personal credit line. And credit cards typically require even less proof of your previous payment history. While you have to be careful with credit because of the exorbitant interest rates, the main benefit this strategy provides is that the ownership of your business isn’t diluted.

Family and friends

One of the most common methods of acquiring capital is through near and dear ones because there is so much less convincing to do. Even though these may be informal transactions, they are nevertheless commitments. So, it’s vital that both parties seek legal counseling, especially if you are being given the money as a loan.


Crowdfunding is a great way for small businesses to raise capital online. It involves small amounts of capital being pulled in from a sizeable group of investors via crowdfunding platforms and social media as well. Since it’s a popular method of securing finance, the competition is stiff. So, you will need to have a brilliant idea or product or generate considerable buzz to differentiate your business from everyone else trying to source finance.


Several non-profit organizations (NPOs) and private companies provide business owners with small loans. Typically, these enterprises prefer patronizing entrepreneurs who find it difficult sourcing bank funding.

Vendor financing

For those entrepreneurs whose business involves tangible goods, it’s not uncommon for distributors and manufacturers to extend them the opportunity of deferring payments until after the products are sold. Based on certain factors like your creditworthiness and agreements to pay extra fees, you might be able to hold off payments till the money starts rolling in. Usually, this period is a month’s duration or even longer. 

There are always more traditional financing avenues you can pursue like venture capitalists and angel investors. If you are just getting your business off the ground, you might find it challenging sourcing funds from these sources because typically, they prefer more seasoned and proven business models which are ready to scale. However, it isn’t impossible.

With an innovative product or service to sell, a comprehensive coverage, and with a robust business plan in place, sourcing relevant financing shouldn’t be all that hard. It’s just a matter of perseverance, determination, and a belief in your endeavor.