5 Types of Business Funding Sources

Getting into business is pretty hard to do, especially when you are limited with the capital you have on hand.

The good thing is that you already have, or can have access to business funding sources without even knowing that you do.

So as a startup entrepreneur, consider all of your options when it comes to funding and take a look at the below 5 types of business funding sources which can help you and your small business obtain the capital needed to succeed.

5 Types of Business Funding Sources

The 5 main types of business funding sources that can help you as a small business owner include the following:

1. Government Funding (grants, loans, tax breaks and financial assistance)
2. Private Investors (equity investors, venture capitalists and angel investors)
3. Family and Friends
4. Business Partners
5. Personal Finance

Government Funding Sources

You may be thinking right now, there is only one Canadian government so what are the “sources” you are talking about.

Well what a lot of Canadians don’t know is that our government is the Canadian government, but when it comes to small business government funding, every province has it’s own funding agency. Within each province there are many other funding agencies that provide government funding to startups and entrepreneurs for various purposes, various needs with various goals.

So that one “Canadian government funding source” turns into hundreds of government grant, loan, tax break and financial assistance programs.

In fact, as of today there are 264 grant programs, 147 l loan programs and 231 other financial assistance programs available by the government funding sources. That means that there is a pot of approximately $612,676,848 in available funding being offered by the Canadian government and all of it’s funding agencies as of today.

Again, there are many different types of government business funding programs. They come in all different forms such as grants (which can be repayable, non-repayable, partial contributors and much more). They also come in the form of loans, which can be low interest, no interest, government guaranteed and more. tax breaks, refunds and credits are also part of government funding incentives offered to small business owners and startup entrepreneurs.

Consider becoming a member here with CanadaStartups to get your access to the Funding Database where you would have the ability to see over 1,500 funding sources that can fund your startup.

Private Investor Funding Sources

Private Investors is the next funding type that can help your business get funded and succeed.

One of the biggest misconceptions of private investors is that you must have a business making millions or have an idea like Facebook to be able to get or attract private investors. But the reality is that private investors come in all different forms and sizes. In fact, in our own funding database we have 862 private investors who provide funding in the amounts from $1,000 to well over $10 million to qualified businesses.

A private investor is in business to make money. The amount of money does not matter at times as long as they get their return on investment.

Think of it this way. If an investor gives you $1,000 and gets that back within a year (due to the success of your business) and a small percentage over like $1,050. This to an investor is seen as a 5% increase in their portfolio. Now think about that investor doing this to a 1,000 business owners per month? That 5 percent increase can result in thousands of dollars per month or per year.

Dealing with private investors is a bit confusing, so be sure to learn more about Private Funding Sources in our Resource Center.

Family and Friends as a Funding Sources

Your family and your friends may sometimes be the first on the list that you turn to when looking for some extra cash in your business. After all, they are the ones who support you and your business idea the most, hopefully

When dealing with family and friends to get business funding, consider the pros and cons.

What happens if the business doesn’t work out and you can’t pay it back? How will your relationships be affected.

Always consider a contract that protects you and your family/friend who is giving you the investment. Ensure both parties agree before proceeding.

Family and friends don’t look at your credit score, thus funding can be all based on personal relationship and hopes and dreams, so ensure your “investor” understands the risk.

Business Partners as a Funding Sources

if you are getting into business on your own, this funding source may not be right for you. However, it doesn’t mean that you should actively seek funding from potential “business partners”. The misconception with business partners is that they have to be involved in your business.

You in fact can collaborate with a “partner” who is more of an angel investor or a behind the scenes bank guy. They provide you with funding, maybe knowledge/experience but you as the business owner are on the front lines doing the day to day work.

If however you do have a partner or multiple partners, each of these funding sources apply to each partner. Be sure to repeat the cycle.

Personal Finances as a Funding Sources

Even though personal finances as a business funding source is last on the list of these 5 types of funding sources for your business, it is often one of the first to be considered by an entrepreneur.

You have your savings, lines of credit, personal credit cards, loans, mortgages..etc

All this is potential capital that can be used towards funding your business.

But before you make that commitment, ensure you know the risks of using your own money.

What if the business fails? Are you able to go-on personally without that borrowed money? Are you able to pay it all back?

Consider the consequences of borrowing.

The above 5 types of business funding sources are all excellent to fund your small business startup. Consider combining them all to obtain maximum funding. However before you do, ensure that you know how much funding you need, what you need it for and how you will benefit from it. Too much funding could be good and bad.

Let us know of any funding sources you believe we missed out on and be sure to check out the Funding Database and access over 1,500 funding sources now!