10 Best Business Funding Sources for 2023

Two startup owners pitching to an investor

Funding options for your business can seem endless, whether you need short- or long-term financing or if your business is in the startup stage or already established in its industry.

That’s why we’ve organized this list of the ten best business funding sources going into 2023 — keep reading to discover the best funding options to match your business and its financial needs.

Ready to get your startup off the ground in 2023? Browse our free startup and small business resources for more guides and ideas.

Related: 5 Best Banks for Startups

  1. Angel Investors

If you’ve ever looked into starting a business, you’ve probably heard of angel investors — a person or group that invests in early-stage companies. They understand the risks of investing with you and can often provide you with other resources to help build your success.

Funding is only one thing that angel investors can bring to the table; they also bring their expertise and network to your doorstep. And because the money from an angel investor isn’t a traditional loan that you’ll have to pay back (instead, they’ll often gain partial ownership of the company), they’ll do everything they can to help your business succeed.

  1. Venture Capitalist Investors

Venture capital refers to a type of private equity and financing that investors provide small businesses and startup companies that they believe to have long-term potential. This funding typically comes from investment banks, well-off investors, and other financial institutions.

Venture capitalists — the people investing venture capital into your business — focus on companies with exceptional growth potential or ones that have seen rapid growth and appear poised to keep expanding rapidly.

  1. Small Business Loans

A small business loan is likely what comes to mind when thinking about funding a new or budding business. Compared to other options, they’re relatively easy to obtain and can be a great way to improve your business’s cash flow.

You’ll need to demonstrate planned use for the funds and a clear need for financing to start or expand your company with a small business loan. With an SBA 7(a) loan — the most common for small business owners — you can receive up to $5 million to use toward startup costs, equipment, land, materials, etc.

  1. Bootstrapping

Bootstrapping is a common way for entrepreneurs to self-fund their startup — it’s the process of starting a business only using personal savings, invested or borrowed funds from friends and family, and income from initial sales.

It’s a challenging path to take, but it does have many benefits. Unlike early investors who get partial ownership of your business, you retain that ownership and your share of the equity. In addition, it keeps you in control of your business model and pushes you to develop processes that produce lasting, immediate cash flows.

A small business owner working by himself

Related: Best Credit Cards for Startups

  1. Government Grants

Grants are a form of funding that, unlike loans, do not require you to pay back the funds; they’re ideal for companies that cannot take on debt or get early investors. They also help owners keep their equity funding costs low.

However, the programs that offer grants to small businesses change frequently, and they are more difficult to obtain than other types of funding. There are many different grant programs available for small businesses and startups — look into your local and federal sources to see if your company is eligible for any government grants.

  1. Loans From Family Members

Another funding route that many small business owners go through is getting help from their friends or family — this helps one of the biggest issues that startups face when trying to get funding: They don’t know anyone in the industry or nobody they do know trusts them enough to invest in their company that early.

However, this type of funding can cause issues — what happens if things go wrong? How will it affect your relationships if you can’t pay back the loan? The risks for your family or friends investing in you are much higher than those of a bank or experienced investor.

  1. Debt Financing

Businesses with equity financing needs can look into debt financing as an alternative to bank loans. It’s typically fast and practical but requires collateral or assets. Debt financing typically looks like a traditional loan, and you must pay the funding back.

However, the payback period and loan details are often more flexible — you might be able to work with a debt financing lender to stretch out your payments, make accelerated payments without penalties, etc.

  1. Private Equity

We mentioned that venture capital is a form of private equity. When you use private equity as a way to fund your business, the lender takes an ownership stake in your company in return for their funding. 

This is a viable lending option for startups and small businesses that need more capital but could also benefit from an expanded network. And while most private equity lenders will trade capital for partial ownership, it can also come in as a form of debt financing, a loan you have to repay, etc.

  1. Crowdfunding Platforms

Raising funds to develop new products or get a business up off the ground using crowdfunding platforms is becoming extremely common. Crowdfunding can be an excellent option for entrepreneurs who have innovative ideas and solid concepts, prototypes, and designs to fund their projects.

Crowdfunding is an alternative financing method mainly consisting of startups and a pool of interested investors. However, you’ll likely have to pay fees on how much funds you raise on a crowdfunding platform, and marketing your project to attract investors is 100% up to you.

  1. R&D Tax Credits
A startup founder holding up different US bills

While a little different from the other ten funding sources on our list, the research and development — R&D — tax credit is a great way for eligible businesses to supplement their cash flow, expand their capital, borrow less from lenders, and kickstart company growth.

Don’t discount the value that tax incentive programs can bring to startups — Reach out today to see if you qualify for the R&D tax credit.

With the R&D credit, the federal government provides startups, small businesses, and other companies credits for investing in innovation — it’s a dollar-for-dollar tax liability reduction for various expenses, including designing, developing, or improving processes, products, techniques, software, formulas, etc. This tax credit is available for any organizations that participate in certain R&D activities.

Related: Accounting for Startups

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