The Best Startup Financing Options Outside of the VCs

You're looking to finance a new business venture, but for one reason or another seeking venture capital just isn't right for you. Maybe you want to maintain ownership of your business or it's more funding than you want right away.

Whatever the reason you're searching somewhere else, don't worry--there are plenty of startup financing options besides venture capital you can consider.

1. Angel Investors

If your issue with venture capital isn't the equity aspect, then finding the right angel investors might help. Angel investors are like venture capital firms on a smaller scale: they're individuals with the means and desire to invest their time, energy, and money on emerging businesses.

Angel investors usually put in less money--and have fewer expectations, few if any legal requirements, and less decision-making power in the company in return. Where venture capital firms give new businesses millions to jumpstart their growth, angel investors understand that they're betting on experiments.

Finding angel investors is a less rigid process, but it's important that you and your investors have a good relationship--or at least share the same vision for your company's path.

2. Crowdfunding

Depending on your business idea, crowdfunding platforms like Kickstarter and Indiegogo could be just what you need to get off the ground. Crowdfunders spend a little money at a time--sometimes "investing" as little as $10 or $20--to see a wide variety of interesting projects turn from idea into business.

Crowdfunding is generally a potential source of startup financing only for certain kinds of businesses. Developing a new app or an interesting gadget? If you work hard on promoting your product over social media and with high-quality videos, you could benefit from crowdfunding. If you're looking to open a shoe repair store or neighborhood bakery, though, you might not gain too much traction.

Crowdfunding is all about capturing the imagination--and connecting it to the wallet.

3. Friends & Family

An age-old source of startup business funding, friends and family can be a blessing or a curse to your financial situation.

On the one hand, your friends and relatives know you best--their willingness to invest in your idea means they trust you to succeed. They'll probably offer you fair rates and long repayment terms, if they're lending you money, or ask for a manageable amount of equity, if they're investing. Finally, friends and family are typically very willing to connect you to their networks, give you their advice, and otherwise help out with your business venture.

On the other hand, friendships and even family relationships have been ruined by less than a business investment. Money can be a touchy subject, especially if you're unable to pay a friend back on time or a relative wants to back out of their investment.

Though seeking funding from friends and family can be fast, convenient, and sensible, it's also pretty risky--unless you approach it like a business deal. Write up your terms, give them to a lawyer, and make sure everyone involved treats your agreement as seriously as you would if you were strangers.

4. Personal Loans

If you're okay with tying your personal credit and assets to your startup's financials, a personal loan could be the way to go. These loans require no business history of any sort, relying only on your credit history to determine terms and rates.

You'll probably find it difficult to secure a personal loan for as much as a business loan, however, and you should keep in mind at all times that it's not just your business at stake if you default. Personal loans require excellent credit scores--typically 640 or higher--and often come with closing costs you should be aware of.

5. Business Credit Cards

If you can qualify for a business credit card, this might be the right method to financing your startup. You'll be able to start building business credit right away, access a revolving line of capital in case of opportunities or emergencies, and benefit from the rewards program your card comes with.

As your startup grows, though, you might want to switch to other kinds of debt financing--relying solely on business credit cards can tie up your credit down the line.

6. Microloans

Some institutions--like the Small Business Administration--offer microloans of up to $50,000 to new or small businesses. (The SBA guarantees these microloans to intermediary lenders, but there are plenty of other programs that loan directly.)

If you're looking to increase your working capital, purchase equipment or inventory, or pursue a smaller business opportunity, a microloan program could help. Since your business doesn't have any financial history to analyze, microloan lenders will take a look at your credit score and business plan to decide on your rates and terms.

"Venture capital" might be the most popular financing route for technology startups and certain kinds of small businesses, but many entrepreneurs succeed with other sorts of funding instead. Each business's needs are different, and there are plenty of business loan options out there for you--get to know them and decide what's best for your business.