Alternative Financing for Startups

Starting a new venture is an exciting but challenging journey. With so many costs involved, from essential SaaS tools to marketing spend to hiring, it can be difficult to secure the funding you need. 

Once you’ve tapped out your own personal savings and are looking for additional means of financing your startup, there are many options available to you, beyond the traditional bank loan.

In this blog, we’ll explore these options, so you can make informed decisions and find the financial flexibility you need to succeed.

Know Your Options: Alternative Financing for Startups

Adequate funding is essential for any company to cover a range of expenses, including research and development, marketing, salaries, office space rental, legal and accounting fees, and more. With several financing options available, finding the right solution for your specific needs is crucial.

This section will delve into the available alternative funding options for startups, helping companies overcome financial hurdles and secure the resources necessary for growth and success. Whether you need financing for software expenses or other business-related costs, there's an option to meet your needs.

Let's explore the available options and their benefits for your startup.

Why Not a Bank Loan?

Most banks will not provide a company with a loan until they have existed for two or three years. This provides the business ample time to establish a customer base and a sustainable business model that reduces the risk of the loan falling into default and the lender losing money. Because of this, bank loans are typically not an option for new businesses when purchasing software.

6 Alternative Financing Options

Many alternative financing options are available for startups, depending on the company's unique circumstances. Here is a look at seven of those options.

1. Equity

Many startup founders give up equity to obtain the money they need for software and other necessities. It’s not as bad as it sounds; depending on the type of investors gained, you’ll have more expertise to navigate the ever-changing business world. 

2. Venture Debt

Venture debt is available for startups that have raised venture capital in the past year. While other types of loans provide financing based on the company's cash flow, venture debt offers financing based on the strength of the company's investors, founding team, and growth potential.

Venture debt loans offer more leeway for companies that haven't been in business long enough to qualify for a traditional loan. However, that doesn't mean it comes without risks. Failure to grow as anticipated or meet specific metrics required in the loan agreement could cause it to default.‍

3. Pitch Competitions and Incubators

These types of events allow for networking opportunities. You’ll be able to meet others in your space and can gain investors or participate in incubator programs. Either option opens you up to a world of financing alternatives. 

4. Bootstrapping

If you want to conduct business how they used to in the old days, bootstrapping is the way to go. Find out where you can pull money from—your bank account, crowdfunding, and even asking friends and family for cash. 

5. Angel Investing

Angel investors will fund your startup and often connect you to the right people who can help you propel forward. It’s a win-win situation for gaining a mentor and the capital needed to operate. They’re also flexible in negotiating terms, often more so than venture capitalists. 

6. Niche Capital Venture Firms

If you consider your industry as hyper-niche, this option has your name written all over it. The newest trend among venture firms is downsizing the industries they serve. 

We’re talking about firms only investing in startups in oral care or technology that specializes in containing wildfires. If you fall along those lines, you’ll have an excellent opportunity to gain funding. 

Need Alternative Financing? Gynger Can Help

Obtaining traditional financing is often impossible for startups and many alternative solutions available have unpleasant tradeoffs, including dilution of equity and lengthy timelines that don't work with your immediate needs. 

Financing solutions offered by Gynger allow you to finance your entire software spend with immediate access to non-dilutive capital.

Use our calculator to see how much capital you could be approved for or contact us to get started.