This post is in paid partnership with The Growth Center, by Microsoft 365.

When you’re building a business there’s one question we all have to answer: Do I self-fund or do I raise money? Unfortunately, there isn’t a definitive answer because there are so many variables and ultimately, the choice depends on your business goals. But if you’re unsure how to finance your business we’re here to help and empower you with the information to get it off the ground.

That’s why we partnered with The Growth Center, by Microsoft 365—filled with resources to help you start, manage, and grow your business—to put together a comprehensive list of options to finance your business from savings to bank loans, angel investors, and friends and family rounds—it’s time to turn your lightbulb moment into reality.

Finance Option 1: Use Your Own Savings
Perhaps the safest way to fund your business is by saving your own money. There’s no risk of debt, or credit card interest but, of course, there is one element you do need to keep in mind—time. Depending on your current income and monthly expenses, it could take you a year or more to save enough and how much you can do with your new business (once it’s time to launch) is also limited to the amount of money you have saved.

There is also the option of withdrawing money from your mortgage (but you must have equity built up in your house to use a cash-out refinance). Alternatively, you can pull from your retirement plan or insurance policy but all of these options do come with significant risk and are dependent on whether the business is a success which might be added stress you don’t want need when starting a new venture. 

C&C’s advice: We definitely love the idea of using your own money to start a business. This means you don’t owe anyone and you have the complete creative freedom to make all of the decisions—and if it fails, you don’t have to pay anyone out, either. But we’re not super keen on the idea of dipping into your retirement, insurance, home loans etc. This feels too risky, especially if you’re not 100% sure if the business will work out, but then again, if you really have a gut feeling and want to go for it, who are we to stand in the way of you and your dreams?

Finance Option 2: Get a Bank Loan
If you need money now (and saving your own will take too long) then you can take out a bank loan. This is a pretty standard agreement between you and the bank in which they will loan you a sum of money based on your credit history and ability to pay it back. Then you pay that loan back each month over an agreed period of time.

C&C Advice: While this is a great way to finance a business, getting a bank loan can be difficult especially if you have bad credit or your business doesn’t have the cash flow yet. A bank will only provide financing if you can prove on paper that your business is generating cash and there are assets to draw on if you can’t make the repayments.

Finance Option 3: Do a Friends and Family Round
If a bank loan isn’t the right path, then you can ask your friends and family to invest in your idea. This is a great way for entrepreneurs to fund a small business when they’re in the very early stages and there are two ways you can sell it to them—you can give them equity in your business (which essentially means you are selling part of your company) or ask them for a loan (which usually comes interest-free).

C&C Advice: A lot of people opt for this financing route but there are a couple of potential concerns we want to raise before you go down this path. Firstly, there is the old saying “never mix business with friendship” or family because you could end up causing a hostile relationship or even worse losing that friend or family member if the business doesn’t work out and you can’t repay the money. Are you willing to take that risk?

Secondly, once you do take their money, be prepared for them to have an opinion on how you run the business. After all, their money is invested so it is in their best interest to make sure it sees a return on investment but it can be challenging to manage that relationship.

Finance Option 4: Consider Microfinancing
Also known as microcredit​, microfinance provides small business owners and entrepreneurs access to capital. If you’re a small or individual business, you don’t have access to traditional financial resources or major institutions so it can be harder to access loans, insurance, and investments that are crucial to help grow your business. Business owners can take out loans that range from as small as $100 to as large as $25,000 (but typically under $50,000) with no collateral.

C&C Advice: This is a great option to kickstart your business in the early stages. There are fewer risks and low-interest rates, too.

Finance Option 5: Look for an Angel Investor
If you’re still not aligned with any of the above options and your business really needs more capital aka cash up-front then you can bring on an angel investor. This is very different from a typical loan, however, as they do expect to hold on the investment for up to five or seven years (but you will agree on those terms together as some do wish to cash out earlier), and they will also be an active advisor. They will typically invest up to $150,000. In most cases, you need to be referred to an angel investor so immerse yourself in the industry you’re about to launch into and network at events.

C&C Advice: Make sure you are prepared with your business plan and growth strategy before you start presenting to angel investors. They want a return on their investment so you will have to prove growth and export potential. Of course, they don’t expect this to happen overnight, but they do want to see that their investment will pay off and they will be rewarded with compensation above what they invested.

Finance Option 6: Use Credit Cards
While it is a popular way to finance a small business you need to make sure you do the research first and find the right credit card for your business with the best rates, fees, and additional benefits. Certainly, the biggest pro of using a credit card is that it’s easy and quick. All business owners should have at least one business credit card to keep their personal and business finances separate.

C&C Advice: As long as you make your payments on time, credit cards make money readily available when you need it without applying for a business loan—which is very convenient. It also means you still own 100% of your company without giving away any equity, like some of the other options above. You will also establish good credit which will help later on when you need to take a larger loan out.

But here are the cons, if your business doesn’t work out and your credit card is still racked up with debt, you will personally be responsible for paying that debt back, at interest. This applies to both personal and business credit cards (this means they can get access to all of your personal assets to get their money back). The highest credit card limit typically caps at $50,000 so keep that in mind if you need more. Despite low-interest rates, they are generally expensive and will not hesitate to charge you for late payments which can sting and affect your credit score.

Finance Option 7: Tap Into Venture Capital
Venture capitalists are known for backing high-growth companies in the early stages. Perhaps the most glamorous of the financing options, VC’s can provide strategic assistance, introductions to potential customers, partners, and employees on top of large sums of money.

C&C Advice: VC funding isn’t easy to obtain or close and you often have to give up a large portion of your company to get the money. You have to be really prepared as a business when you do acquire VC funding and show rapid, steady sales growth.

Of course, every business is different so there is no right or wrong way to finance yours. Some need a lot of capital up-front which requires loans or VC while others can be lean at first and so bootstrapping might be the best option. Ultimately it comes down to the type of company you’re launching and figuring out what works best for the business and for you.

For more information on financing and how to start a business, visit The Growth Center, by Microsoft 365—it’s filled with resources to help you start, manage, and grow your business.