Other Funding Sources and Their Purpose

Other Funding Sources and Their Purpose

July 22, 2020 by investor

Hello, this is Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

Equity funding is just one source of funding for your startup. There are many others.

In general, equity funding is for launching and growing a business and is the most expensive form of funding. 

Each source of funding brings a specific support to the business and can reduce the amount of funding taken through equity.

In reviewing your fundraise plan, consider how these may fit in:

Grants – mostly government-based grants that are one-time offerings and need not be paid back. 

Loans – debt funding which must be repaid at some point in time.

Factoring/AR Funding – selling your invoices and accounts receivables in return for cash.

Equipment Leasing – leasing equipment instead of buying it reduces cash burn and spreads out the payments.

Line of credit – short-term debt used for smoothing out the cash-flow cycles.

Crowdfunding – prepayment for products.

Accelerators and incubators – mentorship programs that provide grant funding.

Bootstrapping – keeping costs low and using revenue to fund the business.

Barter – exchanging services with another company instead of paying cash.

Anchor clients – a client who pays for a custom version of your product.

Consultation funding – extending your product to include consultation services.

Supplier funding – contract manufacturing or software developers who provide upfront cash injections in return for a contract to build or design your product. 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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Copyright (c) 2020, Hall Martin and investorconnect.org. All rights reserved.

Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.