How to Vet Different Startup Financing Options

For startups, one of the initial keys to success is obtaining enough financing to get off the ground and moving. But with so many different financing options – and a wide swatch of terms from lender to lender – knowing which route to pursue isn’t always obvious.

Common Startup Financing Options

It used to be that small businesses only had one or two banks to choose from. In today’s marketplace, there’s a diverse array of financing options just waiting to be tapped. Here are a few of the most common: 

  • Small business loans. While they’ve become increasingly difficult to obtain, traditional small business loans from banks and credit unions may offer you the funding you need to get your business moving in the right direction. 
  • Online lending. The rise of the internet has given way to online lending, which is much faster and more convenient than going through a brick and mortar lender. They also play by their own rules, which means they tend to be more lenient with their approval requirements. 
  • Friends and family. Not every entrepreneur has a personal network of people who can fund their business venture, but friends and family are often a good resource when you need small amounts of money. 
  • Hard money loans. Even if you don’t want to ask friends and family, you can still get hard money loans from private investors in your area. These people don’t always advertise their services, so you’ll probably have to network to identify possible suitors. 
  • If you have a particularly compelling product that you think may have mass appeal, crowdfunding lets you raise money without having to pay it back.

 If you’re in a specific industry – such as science, health, or technology – you may find different government grants from the Small Business Administration, Small Business Innovation Research, or Small Business Technology Transfer programs.

 4 Factors to Consider When Vetting Options

 While it’s good to have options, you have to spend time comparing all of the funding products you have available so you make the smart choice. Here are a few factors you’ll want to consider: 

  1. Application Process 

Most people fail to consider the application process of various financing options until they’re already in the middle of it. By considering it ahead of time, you can save yourself time and frustration.

If you’re looking for ease and convenience, online lending is probably your best bet. Companies like Nationwide Corporate Finance are known for simplifying startup loan applications and helping people get approved with as little friction as possible – often in hours. Compare that to a bank, which could take days or weeks. 

  1. Financing Terms 

When you dig into the proverbial meat and potatoes of startup funding, you’re forced to confront the specific terms of the financing deal. Some of the things you’ll want to compare include loan amounts, interest rates, repayment terms, and how the money can be spent.

A lot of entrepreneurs make the mistake of only comparing interest rates, which is very shortsighted. The other terms above have just as much, if not more, of an impact on a startup. You want as much flexibility and leeway as possible. Issues always emerge in the early stages of the startup lifecycle, and you don’t want to feel undue pressure.  

  1. Hands-On vs. Hands-Off 

Are you only looking for money – or do you also want some help and advice? If you’re looking for the latter, you’ll need to work with someone like an angel investor or venture capitalist who offers guidance as a part of the deal. If you don’t care about this, a more traditional loan will work.

  1. Comfort Level 

Intuitively speaking, you have to listen to your heart and make a determination regarding which financing options are most comfortable. In other words, what does your gut say? While you don’t want to make a decision on gut feelings alone, this is often the tipping point. 

Give Your Startup a Strong Foundation 

Startup funding isn’t something you can afford to take lightly. Whether you realize it or not, the choices you make now will have long-term consequences on the health and viability of your business venture.

Give your company a stable foundation by meticulously vetting each of your options and choosing accordingly.


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September 9, 2018 How to Vet Different Startup Financing Options