How to Choose the Right Funding Option for Your Business

Most people hear the word fundraising and immediately think of pitch decks and high-pressure investor meetings. But most businesses will never raise venture capital funding. There are many ways to access capital, and the right option depends on what you’re building, how fast you want to grow, and the kind of relationship you want with your business.

Each path to funding comes with its own expectations. When you understand not just what’s available, but what each option asks of you in return, it’s easier to choose the right fit, and avoid the ones that will drain your sanity.

Start With What You’re Building

Before you decide how to raise money, you have to get clear on why you’re raising it. Capital doesn't just have to be about keeping the lights on, it can also be what helps fuel your growth. For many first-time founders, especially women, people of color, immigrant founders, or anyone who didn’t grow up around access to capital, the subject of money can feel uncomfortable. Sometimes it can even feel off-limits. Many of us were raised to believe that if you work hard and keep your head down, the results will follow. That ambition should be quiet. That you should be grateful for what you’re given. But there is no shame in taking on a loan. And landing an investment deal doesn’t automatically make you a better entrepreneur. What matters most is building a business that aligns with your values and choosing a funding path that supports the future you’re working toward.

As you explore what kind of capital makes sense for you, it's important to take the time to ask yourself:

• What kind of business am I actually trying to build? Because a startup built for rapid scale has different capital needs than a service‑based business or a retail shop.

  
  

• How fast do I want or need to grow? Some capital sources push you to scale quickly. Others let you build at your own pace.

  
  

• What am I willing to give up or take on? Every capital type has certain requirements and expectations. Make sure you’re comfortable with the tradeoffs before saying yes.

  
  

• What goal or milestone can this money help me reach? Don’t raise money just to “have more.” Know what this funding will help you do, like reach a new audience, hire support, or provide room to breathe.

Understanding Your Capital Options

Every way of raising money comes with tradeoffs. Some paths offer speed, but require control. Others let you grow at your own pace, but take longer to see results. The key is understanding what each option actually looks like in practice. Because it will shape how you spend your time, where your energy goes, and what your business needs from you in return.

Bootstrapping

Bootstrapping means building your business using your own income, savings, or early revenue. It's often seen as the most accessible path because it doesn’t require outside approval or anyone else’s timeline. For many underestimated founders, especially those without connections to capital networks, bootstrapping isn’t just a choice. It’s the only option at first. But bootstrapping also has its limits. It has a tendency to slow growth, especially if you’re constantly reinvesting small wins instead of taking risks that could push you forward. Still, bootstrapping gives you the most control and teaches resourcefulness in a way no other capital type can. It’s a strong path when you’re still testing your idea, building a steady income, or simply not ready to bring other people into your business decisions.

If you're choosing to bootstrap, here are a few things to keep in mind:

• You are your own safety net. There’s no outside funding to fall back on, so plan for slow months, unexpected expenses, and personal runway.

  
  

• Revenue is your main investor. Early sales are what fuel your next step, so make sure to stay close to your customer.

  
  

• Time becomes one of your biggest tradeoffs. Without capital to outsource or speed things up, your time becomes one of your most valuable resources. Spend it wisely.

  
  

• Growth will likely be slower, but more sustainable. You’re building without pressure to scale before you're ready. Consider that a strength.

  
  

• Mindset matters. It’s easy to undervalue what you’re building when you don’t have outside validation. But bootstrapping requires belief in your long game.

Bank & Community Lending

Bank loans, community lenders, and CDFIs (Community Development Financial Institutions) are some of the most well-known forms of capital, but also some of the most misunderstood. Many founders assume they won’t qualify, or that loans are a sign of weakness. But for product-based businesses, local service providers, or founders looking to level up infrastructure, loans can offer flexibility without giving up control. The challenge is that traditional banks often prioritize credit history, collateral, and past business revenue, things many early founders don’t have. That’s where CDFIs or mission-driven community lenders come in. They often provide more accessible, relationship-based lending for those who may not qualify through traditional institutions. Just remember, loans require repayment. That means having a realistic plan for how the business will cover that cost without putting your personal finances at risk.

If you’re exploring lending options, here’s what to keep in mind:

• You’ll need documentation. Expect to share a business plan, financial projections, and your personal credit history, even for a small loan.

  
  

• Have a clear repayment plan. Don’t just hope sales increase. Know exactly how the loan will generate revenue or savings.

  
  

• Use loans for revenue-generating activities. This isn’t about keeping up appearances. Spend it on things that move the business forward.

  
  

• Keep your personal finances protected. Understand the terms, interest rates, and what happens if you can’t pay on time.

• Create a relationship with your banker. Whether it's a traditional bank or community lender, stay in touch. Keep them updated during the good AND the bad. It builds trust before you ever need to ask for more.

Grants & Non-Dilutive Capital

Grants can be a valuable option for founders who know how to tell their story and connect their work to a larger mission. They don’t require repayment and can offer credibility, especially in early stages. But they shouldn’t be your only strategy. Most grants are competitive, time-bound, and often tied to specific deliverables or programming. Think of them as part of a broader capital approach, not the full pipeline. There are many types of grants to explore: traditional applications, program-based cohorts, pitch competitions, corporate-backed initiatives, and industry or region-specific opportunities. The most strategic founders choose ones that align with what they’re already building.

If you're pursuing grant funding, keep this in mind:

• Match your mission. Most grants go to businesses with a clear story and purpose. Make sure your application reflects how your values and work align with theirs.

• Stay organized. Most applications require detailed plans, documentation, and sometimes follow-up reporting.

  
  

• Don’t chase every opportunity. Be strategic about where you apply. Quality over quantity.

  
  

• Be clear about your numbers. Know exactly how the grant will be used, what it will help you do, and how you’ll track success.

  
  

• Track your answers. Save the answers you use in applications in a separate word document so you’re not starting from scratch each time. Adjust how you tell your story and answer key questions based on feedback and what you learn along the way.

Crowdfunding

Crowdfunding isn’t just about going viral. It can be a strategic way to raise capital while also building community and testing demand. There are two main types: donation or reward-based platforms, where backers contribute in exchange for early access or perks, and equity crowdfunding platforms, where supporters invest actual capital in return for a small ownership stake. Both approaches require a compelling story and consistent outreach, but they come with different expectations, timelines, and levels of oversight. Crowdfunding can be especially powerful for consumer-facing products, mission-driven initiatives, or any founder with an engaged audience and a clear message.

If you’re considering crowdfunding, know this:

• Start with your story. Crowdfunding success depends on people connecting with why you’re building, not just what you’re selling. Make your mission clear and relatable.

  
  

• Engage your community early. Crowdfunding isn’t about strangers discovering you. It’s about mobilizing the people who believe in your work. Build momentum even before you launch.

  
  

• Be clear on what you're offering. Whether it’s early access, rewards, or equity, people need to understand exactly what they’re contributing to and what they’ll get in return.

  
  

• Plan to promote. A successful campaign takes ongoing outreach. Emails, social posts, personal asks. Have a plan for showing up consistently throughout the campaign.

  
  

• Understand the rules. Equity platforms have specific legal, financial, and compliance requirements. Make sure you're prepared for the due diligence and public-facing details involved.

Angel Investment & Venture Capital

Despite how much attention it gets, this is actually the least common form of funding. Less than 1% of new businesses ever raise capital from angels or traditional venture capital. That’s because these types of investors are looking for big bets that can scale fast and deliver high returns. Aare typically wealthy individuals who invest their own money into early-stage businesses they believe in. They tend to come in earlier, take on more risk, and often bring mentorship, industry connections, or operational experience. Some are values-aligned or focused on a specific community, while others are simply looking for a high-potential return. Venture capital firms pool money from larger institutions and wealthy individuals to invest it into startups with the goal of multiplying that capital. Their job is to return the fund, not just support good businesses. This means they’re often betting on a few companies that could deliver outsized returns and make up for the rest.

If you're seeking angel or VC funding, keep these in mind:

• You’re not just selling your product. You’re pitching a big, fast-moving opportunity. Investors want to see a big market, fast growth potential, and a plan for how they’ll get a return on their money.

  
  

• Relationships come before checks. Most investors back people, not just ideas. Focus on building trust and showing traction before making the ask.

  
  

• Clarify your long-term plan. These investors want a clear path to scale and a sense of your exit strategy. If you're not building toward that, it may not be the right path.

  
  

• Not all investors are created equal. Choose those who align with your values and bring more than just money. The wrong partner can not only slow you down, it can very well be the end of your business.

  
  

• Fundraising is a job. Pitching, following up, negotiating, it takes real time and energy. Just don’t lose sight of the business you’re building or the customers who got you this far.

Revenue-Based Financing

Revenue-based financing (RBF) is an option that sits somewhere between a loan and investment. Instead of giving up equity or committing to fixed loan payments, you agree to pay back a percentage of your revenue over time, until a set total is reached. It’s a flexible way to access capital without giving up ownership or locking into rigid repayment terms.

RBF is often best for businesses with steady, predictable revenue and strong margins. It works particularly well for product-based businesses, subscription models, or companies in growth mode that need capital to unlock the next stage but don’t want the pressure of equity dilution.

If you’re exploring RBF, here’s what to keep in mind:

• You’ll need consistent revenue. Your payments come out of your sales, so cash flow matters. Make sure your margins can support this structure.

  
  

• Know the total cost. While RBF avoids interest in the traditional sense, the total repayment amount is fixed. Always understand what you’ll pay back and how long it might take.

  
  

• This is not a fit for all business models. If your revenue is highly seasonal, inconsistent, or unpredictable, this model may be more stress than support.

  
  

• Some lenders want visibility into your data. Be ready to share financials, revenue history, and payment systems to qualify and maintain funding.

Keep Your Growth in Perspective

Capital can support your growth, but it won’t replace the work of building something real. Before you say yes to funding, get grounded in what you're building and what it needs from you. Not every opportunity is a good fit, and that’s not a reflection of your worth or potential. Stay focused on your vision, and choose the path that lets you grow on your terms.