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Bootstrapping means using your own savings and credit for startup costs. This is the simplest funding option, but depending on your financial situation, it can also be one of the most difficult (and risky).

There are both benefits and downsides to becoming a startup bootstrapper. The main benefit is that you aren’t tied to anyone else as you start your business; it’s an entirely individual operation, where control over every aspect and decision is yours, and you aren’t tethered to a loan that needs to be repaid. Plus, you don’t have to worry about business ownership and revenue being diluted between investors.

As for the downsides… There are, of course, personal financial risks to using your credit and/or sinking all your savings into a small business. It may also be more difficult to generate enough capital to get things off the ground and provide a good chance of success. However, if you’re OK with starting your business off small, and you understand and are willing to take the risk, bootstrapping could be the right option for you.

2. Customer revenue

This is really part 2 of the bootstrapping method, and the ultimate goal of every funding option. Reaching the point where revenue exceeds all of your costs (AKA profitability) is fundamentally the best way to fund your business and steadily CREATE GROWTH. You’ll need some initial capital, of course, and in this funding pathway that usually comes from your own savings (as we talked about in point 1). Then, when you start bringing in enough revenue, your business will essentially be funded by your customers.

However, if you need and want to grow quickly, this method may be too slow for you. Keep in mind that most small businesses will take a while to get off the ground and start earning revenue that exceeds costs. In some cases, capturing market share quickly at an operating loss is an acceptable modus operandi, with ‘break even’ or ‘profit’ being a future goal, rather than a current necessity.

3. Borrowing money from family and friends

Before you visit the bank (more on that in point 5 below), you might want to consider a borrowing arrangement with family or friends. After all, there’s no better motivation to generate ROI than to borrow money from people you love.

However, it’s often advised not to mix business too closely with your personal life, and this option definitely crosses that boundary. But if you feel confident that borrowing from a family member or friend isn’t going to cause problems (for the business or for your relationship), it can be a great option that bypasses the difficulty of securing a bank loan.

Just make sure those lending you the money understand that it’s an investment with an element of risk – and that they may not see the money back for a while, if at all.

4. Grants

Grants are a fantastic way to obtain capital for starting your business. You’ll usually have to meet eligibility requirements and go through a competitive application process, but it’s worth it for the chance to secure interest-free funding.

Most state governments have startup programs that involve competitively granting money to promising startups, or loaning money on good terms. In New South Wales it’s the JOBS FOR NSW program; LAUNCHVIC in Victoria; ADVANCE QUEENSLAND in QLD; and so on.

Locally, AWESOME NEWCASTLE provides a $1000 grant each month to a business, individual, organisation or not-for-profit. Other organisations like the NEWCASTLE PERMANENT and PORT WARATAH COAL SERVICES also offer grants for eligible businesses with a community focus.

5. Loans

If you’re a new business owner without a track record, you might find it difficult to get a loan from a bank, especially if it’s one of the big four. However, the government RECENTLY ANNOUNCED $2 billion of funding for the small business loan market – specifically for smaller banks and non-bank lenders, which might start to make things a little easier.

Non-bank loan pathways in particular, such as FUNDA and MANY RIVERS, offer an alternative, more accessible route for small startups seeking business loans.

There are also some government opportunities such as REGIONAL GROWTH LOANS, which are offered interest-free through for businesses outside Sydney, Newcastle and Wollongong.

6. Investors

A common funding approach taken by many startups is to seek investors. As well as providing vital funding that might not be possible through personal savings or a direct loan, being involved with well-respected investors can be an indicator of credibility to other investors or provide valuable advice and introductions.

There are several different types of investors that startups can partner with, including:

Angel investors. These are high-net-worth individuals who often ‘seed’ companies with their own money to provide a runway to profitability. Angel investors usually provide capital in exchange for equity (a share of business ownership) or convertible debt (debt that will be converted to equity in future).

Venture capitalists. These are professionals investing who run a pooled fund on behalf of other investors – essentially meaning they invest other people’s money in startups, looking for significant growth to achieve a high return (at least 10x) on the investment. Venture capitalist funding usually comes in after an initial round of funding (such as ‘seed’ funding from angel investors).

Private equity firms. These are companies that specialise in investing in startups in order to grow them significantly and return their investment.