10 Ways to Fund Your Startup in 2023

Last Updated: 

September 12, 2023

Starting a new business can be an exciting yet daunting endeavour. One of the biggest challenges faced by entrepreneurs is figuring out how to fund their startup. While some startups are able to secure venture capital or angel investments, most have to bootstrap their business using personal finances, loans or other creative financing methods. Having enough capital is crucial in the early stages to handle expenses like equipment, inventory, marketing, salaries and other overhead costs.

This article will explore 10 creative ways entrepreneurs can fund their startup without relying solely on traditional sources like bank loans or equity financing. The options presented range from micro-financing and crowdfunding to tapping into government grants and getting prepayments from customers. Several tips are also included to help entrepreneurs successfully implement these funding strategies.

Key Takeaways on Funding Your Startup

  1. Bootstrap Using Personal Funds: Use your own savings and assets to start your business, but be frugal and prioritise essential expenses.
  2. Ask Friends and Family for Loans: Borrow money from close acquaintances, but formalise agreements and maintain clear repayment terms.
  3. Use Business Credit Cards and Loans: Access capital quickly through business credit cards and loans, but manage balances and build credit history.
  4. Tap into Government Grants and Programs: Explore government grants, loans, and programs tailored to startups, but be prepared for a lengthy application process.
  5. Enter Contests and Pitch Competitions: Participate in business plan contests and pitch competitions to win cash prizes and gain exposure.
  6. Use Micro-loans and Peer-to-Peer Lending: Raise capital from multiple individual lenders through micro-loans and peer-to-peer lending networks.
  7. Use Crowdfunding Platforms: Launch crowdfunding campaigns on platforms like Kickstarter and Indiegogo to raise funds through pre-orders.
  8. Presell Products or Services: Generate capital by pre-selling products, services, or memberships before the official launch.
  9. Offer Rewards for Referrals and Reviews: Incentivise customers to refer new business or leave positive reviews to leverage satisfied buyers for marketing.
  10. Invoice Factoring: Borrow against outstanding invoices by selling them to factoring companies, but be mindful of fees and creditworthiness of customers.
Want to Close Bigger Deals?

1. Bootstrap Using Personal Funds

One of the most common ways founders fund their startups initially is by using their own savings and assets. This can include dipping into bank accounts, cashing out investments, borrowing against 401Ks or using personal credit cards and lines of credit. Bootstrapping with personal finances allows entrepreneurs to retain full ownership and control of their business. It also forces founders to be frugal and lean in their spending. On the downside, it can put personal assets at risk if the business fails. Those with limited personal funds may not be able to fully capitalise their startups this way.

Tips for success:

  • Prioritise spending on essentials like product development and sales/marketing.
  • Avoid unnecessary expenses like lavish offices or overhiring early on.
  • Set budgets and track spending to conserve cash.
  • Pay yourself a small salary to cover living expenses.

2. Ask Friends and Family for Loans

An extension of bootstrapping is asking close friends and family members to invest in your startup by lending you money. Unlike taking money from professional investors, these payday loans and cash advance or personal loans usually don't involve giving up equity. The terms are also more flexible since the lenders are people you know well. The cons are the potential strain on relationships if the business fails and the startup cannot repay the loans. There's also a limit to how much capital can be raised this way.

Tips for success:

  • Set clear terms for repayment schedule and interest due.
  • Treat it like a professional loan - be formal about agreements and payments.
  • Only borrow what you absolutely need so it can be repaid comfortably.
  • Keep lenders updated on business progress.

3. Use Business Credit Cards and Loans

Business credit card and small business loans from banks are a common way for startups to access capital quickly. Business cards can be used to float expenses in the short-term while loans allow larger lump sums to be borrowed and repaid over time with interest. The downside is business loans usually require a personal guarantee and good credit score while business cards have high-interest rates if balances are not paid off monthly. The amount that can be borrowed also tops out at a certain level for each product.

Tips for success:

  • Compare interest rates and fees across business card and loan products.
  • Build business credit history to qualify for higher loan/card limits over time.
  • Dedicate the capital only to high ROI expenses like inventory or marketing.
  • Pay off balances promptly to avoid ballooning interest charges.

4. Tap into Government Grants and Programs

The government offers a surprising variety of grants, loans and other programs to help startups get off the ground - you just have to research and apply for them. Options include SBA loans with attractive terms for women-owned, veteran-owned or minority-owned businesses. Small Business Innovation Research and Small Business Technology Transfer grants provide R&D funding for tech startups. State and local governments also have special loans and grants for local entrepreneurs. The challenge is identifying and qualifying for the most relevant programs, which takes time.

Tips for success:

  • Search sites like Grants.gov and SBA.gov for federal grant/loan opportunities.
  • Check state and local economic development agency websites for local options.
  • Hire a grant writer consultant to match your business to the best programs.
  • Plan well in advance - government programs often have lengthy applications.

5. Enter Contests and Pitch Competitions

An exciting way for startups to win some startup capital is by entering business plan contests and startup pitch competitions. These contests provide exposure to potential investors while allowing companies to win cash prizes to fund their ventures. For example, 43North grants $5 million annually to entrepreneurs in Buffalo, NY. Fortune Magazine's Change the World contest awards $250k and mentorship. University pitch contests like those held at Harvard and Stanford also offer grants of $50k or more to student startups. Just be selective about the contests you enter by weighing the effort required against potential rewards.

Tips for success:

  • Research upcoming pitch contests through sites like Gust.com that aggregate opportunities.
  • Polish pitch deck, financials and business plan before applying.
  • Maximise exposure by entering multiple reputable contests, focusing on those offering significant prizes or investor interest.

6. Use Micro-loans and Peer-to-Peer Lending

Micro-loans and peer-to-peer lending networks allow startups to raise small amounts of capital from multiple individual lenders. Microloans offered by nonprofits like Kiva or Accion provide $500 to $50k at affordable interest rates to small businesses unable to qualify for bank loans. Peer-to-peer sites like Prosper and LendingClub allow individuals to lend to businesses directly. By borrowing small amounts from many lenders, startups can often fund specific needs like buying inventory. The challenge is finding enough lenders willing to take a risk on a new business.

Tips for success:

  • Emphasise how the loan will help grow the business when pitching to lenders.
  • Offer lenders incentives like discounts on products/services.
  • Start with smaller loan amounts to establish credibility before asking for more capital.

7. Use Crowdfunding Platforms

Crowdfunding platforms like Kickstarter and Indiegogo allow startups to raise funding by taking pre-orders from individual donors/customers. Entrepreneurs set a fundraising goal and deadline then market the campaign heavily through social media and email lists. Backers pledge money but are only charged if the goal is met by the deadline. The startup receives capital they don't have to repay, while backers often get the product at a discount as a reward for supporting the campaign early. The challenge is having an exciting product/campaign that goes viral online.

Tips for success:

  • Create a slick campaign page with video/imagery showing your product.
  • Build excitement through engagement on social media leading up to launch.
  • Offer compelling backer rewards at various pledge levels like discounts or limited editions.
  • Partner with influencers/bloggers to promote the campaign to their followers.

8. Presell Products or Services

Some startups raise funds by preselling products, services or memberships before launching them. This shows customer demand while generating crucial capital to build initial inventory and fund operations. You can set up a basic website taking preorders, outlining features, pricing and estimated delivery timeline to make the offering real for buyers. The catch is delivering on what you promise - you don't want to lose trust by being unable to meet a heavily promoted deadline.

Tips for success:

  • Consult manufacturing partners first to develop realistic delivery timelines you can meet.
  • Offer discounts for customers willing to pre-purchase well in advance of delivery.
  • Frequently update pre-purchasers to maintain excitement as you work to fulfil orders.

9. Offer Rewards for Referrals and Reviews

Some innovative startups offer rewards like discounts, credits or gifts to customers who refer new business or leave positive reviews. This allows you to leverage satisfied buyers to help market your product for free. For example, D Ribose gives $30 for referrals that result in sales over $40. Uber offers riders account credits for referrals. The risk is paying out rewards before earning revenue from the new business those referrals bring in. You also still need some budget for paid ads to bootstrap the process.

Tips for success:

  • Require referred customers complete a purchase before issuing rewards to the referrer.
  • Set a cap on referral rewards per customer so costs don't spiral out of control.
  • Start with smaller rewards like 20% discounts to minimise risks.
  • Tie rewards directly to positive reviews on Google, Yelp or Facebook.

10. Invoice Factoring

Invoice factoring allows young companies with outstanding invoices to borrow against the amounts they are owed by customers. A factoring company buys the invoices at a discount then collects the full amounts later directly from the customers when due. This provides the startup immediate capital to reinvest in the business. The tradeoff is the fees charged by the factoring company can be high. Having delinquent customers who fail to pay invoices also passes risk back to the startup.

Tips for success:

  • Research factoring companies to compare rates and fees.
  • Only sell invoices from creditworthy customers unlikely to default.
  • Avoid relying too heavily on factoring so your profits aren't eaten by fees.
  • Use factoring selectively to finance big purchases like inventory orders.

Frequently Asked Questions

What if I have bad personal credit? Can I still finance my startup? 

Yes, there are still options even if your personal credit score is poor. Focus on building business credit using company credit cards and loans in the business name. Explore government grants and microloans that look at the business merits rather than personal score. Also use asset-based financing like invoice factoring secured by outstanding receivables.

Should I wait until I raise funding to start my business?

No, it's better to start lean and bootstrap early sales yourself first. This lets you validate the business concept, refine your product, build initial customers and traction that will then impress investors down the line.

Is venture capital funding a realistic option for first-time entrepreneurs? 

VC funding is very tough for first-timers since investors look for seasoned founders with a track record. Expect VC to be an option only after you have an established product and substantial revenue/growth - this is usually Series A stage or later.

Are there downsides to crowdfunding?

Crowdfunding can be very powerful but also comes with challenges. Marketing a campaign takes major effort since you usually need hundreds of backers usually to reach a goal. You also have to produce and ship products after the campaign, unlike other funding sources. There's also the risk of not meeting your goal and getting no funding.

How much of my startup should I self-fund? 

There's no ideal percentage, but 20-30% of needed capital from personal funds is a reasonable target. This shows investors you have skin in the game without overexposing personal assets. Remaining 70-80% can be raised through other financing methods.


Funding a startup takes creativity and perseverance. While raising outside investment from angels or VCs is ideal, most entrepreneurs have to bootstrap the first stage using more accessible capital sources like personal funds, loans, grants and pre-orders. By mixing and matching strategies like crowdfunding, business loans and factoring, almost any new venture can find a way to get up and running. The key is understanding your options, pursuing selected strategies vigorously and continually exploring new possibilities as the business grows. With persistence and smarts, accessing enough startup funding is possible even on limited resources.

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