Funding options for an early-stage startup

As a startup founder, you will usually grow the business as much as you can without any funding, but eventually, you may hit a brick wall because you need finance to keep developing your solution, or because you need to grow faster to keep up with the market. Here, you are faced with two options: borrow money in the form of debt that you have to pay back with interest or raise investment and essentially sell a stake of your business for capital. This decision will depend on your situation and preference as a founder.

Equity vs debt funding: things to consider
It's worth considering that selling equity in your business sets you on a different trajectory. You will have other stakeholders with expectations on the business' success - is this a commitment you’re ready to take on? If not, perhaps debt funding is a better route for you. Of course, there are a few other options too: you could find some grant funding or raise through crowdfunding.

Debt Funding
Receive capital that you have to pay back on certain terms, usually with interest. Debt funding is a good choice when you have a clear idea of how you will pay the money back within the timeframe required for example: to fund the resources for manufacturing a product which you will then sell for a profit. If you are a very early-stage business with no history, getting a loan from a bank may be difficult.

Types of debt funding:

• Get a loan from a bank

• Get a loan from an individual

• Invoice finance

• Government loan

Equity funding
Receive capital in return for selling a share of your business and therefore sharing the rewards of the success of the business in the future. Equity funding is a good fit if you’re aiming towards a liquidy event: selling the business or doing an IPO.

Types of equity funding:

• Angel investment

• VC Investment

• Equity crowdfunding

Other kinds of funding
There are other avenues to consider when funding your startup.

• Government grant funding
  The government will issue grant funding (money you do not have to pay back) to fuel growth in innovation, in certain sectors or regions of the country. Whilst you do not give them equity in exchange or have to pay the money back, you will have to report back to them on the use of funds and the success of the funded project/business.

• Reward-based crowdfunding / Pre-orders
  If you already have a loyal customer base or following, you could raise money from your customers by offering them the promise of a product or reward.