5 Proven Ways to Fund Your Small Business

Business Tips - August 8, 2023

5 easy but proven ways to get funding for your small business

Starting a small business is an exciting venture, but one of the biggest challenges that many entrepreneurs face is obtaining the necessary funds to get their business off the ground. 

Whether you’re looking to start a new company or expand an existing one, having access to sufficient funding is crucial for success.

In this guide, we will explore various financing options available to small business owners, highlighting the benefits and considerations of each.

By understanding the different avenues for funding your small business, you can make informed decisions and choose the most suitable approach for your specific needs.

Whether you’re bootstrapping your venture or seeking external support, this guide will provide you with valuable insights and tips to help you secure the funding you need. 

What is business financing?

Business financing refers to the process of acquiring funds or capital to support the activities, operations, and growth of a business. It involves obtaining the necessary financial resources that a business needs for various purposes, such as starting the business, purchasing assets, funding day-to-day operations, expanding operations, or launching new projects.

5 Proven Ways To Fund Your Business

1: Friends and family

Friends and family refers to obtaining financial support from personal relationships such as relatives, close friends, or acquaintances who have a personal connection with the business owner and believe in their entrepreneurial venture. 


  • Accessibility and Flexibility: Family and friends are often more accessible and approachable than traditional lenders or investors.
  • Trust and Support: Family and friends who provide funding often have a deep level of trust and belief in the small business owner.
  • Potential Lower Costs: Family and friends may offer loans or investments at lower interest rates or without interest altogether.


  • Strained Relationships: Mixing personal and financial matters can sometimes strain relationships with family and friends.
  • Lack of Expertise and Business Acumen: While family and friends may provide financial support, they may not possess the necessary expertise or experience in running a business.
  • Limited Funding Capacity: Relying solely on family and friends for funding can have limitations in terms of the available capital.

2: Loans

Loans refer to borrowed funds provided by lenders that require repayment over a specified period with interest. Small businesses can obtain loans from banks, credit unions, or online lenders to finance various needs such as starting a business, expanding operations, purchasing assets, or managing cash flow. 


  • Retained Ownership and Control: When small businesses obtain funding through loans, they retain full ownership and control over their company.
  • Predictable Repayment Structure: Loans typically come with a structured repayment plan, including fixed monthly payments over a specific term. 
  • Building Credit History: Timely repayment of loans helps establish and strengthen the business’s credit history. 


  • Debt and Interest Payments: Loans involve the accumulation of debt, and small businesses are obligated to repay the borrowed amount with interest
  • Collateral Requirements and Personal Guarantees: Some lenders may require collateral or personal guarantees when issuing loans to small businesses.
  • Limited Flexibility: Loans often come with specific terms and conditions, including repayment schedules and fixed interest rates. This lack of flexibility can be challenging for small businesses, especially if they encounter unexpected financial difficulties

3: Grants

Grants are non-repayable funds provided by government agencies, foundations, or organizations to support specific projects, initiatives, or sectors. Unlike loans or equity financing, grants do not require repayment or the relinquishment of ownership. 


  • Non-Repayable Funds: Grants provide small businesses with non-repayable funds, meaning they do not need to be paid back like loans. This eliminates the burden of debt and interest payments
  • Support for Innovation and Research: Grants often target specific industries, technologies, or research areas. They are designed to foster innovation and support businesses engaged in cutting-edge projects or initiatives.
  • Enhanced Credibility and Reputation: Receiving a grant can enhance the credibility and reputation of a small business.


  • Competitive and Limited Availability: Grants for small businesses are highly competitive, with numerous applicants vying for a limited pool of funds.
  • Stringent Eligibility and Compliance Requirements: Grants often come with stringent eligibility criteria and compliance obligations.
  • Restrictions on Fund Allocation and Use: Grants often come with restrictions on how the funds can be allocated and used. They may be designated for specific purposes, such as research, training, or capital investments.

4: Investors

Investors are individuals or organizations that provide financial resources to support the growth and development of a business in exchange for ownership or profit-sharing arrangements. They can be venture capitalists, angel investors, or other types of investment firms


  • Access to Capital: Investor funding provides small businesses with much-needed capital to start or expand their operations.
  • Expertise and Guidance: Investors often bring valuable expertise and industry knowledge to the table. They can provide strategic guidance, mentorship, and access to their professional networks
  • Network Expansion: Partnering with investors can open doors to an extensive network of contacts, potential customers, and business partners


  • Loss of Control: Accepting investor funding usually involves relinquishing a portion of control over the business.
  • Dilution of Ownership: By accepting investor funding, small business owners often need to issue equity or shares to the investors.
  • Pressure for Growth and Return on Investment: Investors typically expect a return on their investment within a specific timeframe.

5: Venture Capital 

Venture capital refers to the investment of capital by specialized firms or investors into early-stage or high-growth companies with significant potential for returns. It involves equity financing, where venture capitalists provide funds in exchange for an ownership stake in the business.


  • Access to Substantial Capital: Venture capital (VC) firms have the capacity to provide significant amounts of capital to small businesses.
  • Business Expertise and Guidance: Venture capitalists bring valuable expertise, industry knowledge, and business acumen to the table.
  • Validation and Credibility: Securing funding from reputable venture capitalists can provide a stamp of validation and credibility for a small business.


  • Loss of Control and Ownership: Venture capital funding often entails the dilution of the small business owner’s control and ownership stake
  • Pressure for Rapid Growth and Exit: Venture capitalists invest in businesses with the expectation of significant returns within a specific timeframe.
  • Selective and Risk-Averse Nature: VC funding is highly selective, and only a small percentage of businesses secure venture capital. VCs often have specific investment criteria, industry preferences, or geographic preferences.

How to get financing for a business ( things to note when seeking financing)

Small businesses seeking financing must keep in mind several critical factors. These factors affect the business’s ability to raise funds.

They include: 

  • Your Creditworthiness: 
  • Having A Solid Business Plan
  • Know the type of finance available
  • Collateral and Guarantees:
  • Understand the risks: 
  • Be Diligent and Prepare for Documentation:
  • Seek Professional Advice: 


Understanding these requirements can help you determine which financing options are a good fit for your business.

Ready to expand your business? Get started with Moniepoint Business Loans today.

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