How to Raise Capital Without Giving up Equity: 15 Ways

Last Updated on December 16, 2022 by Selina Parker

Money is a necessity for starting a business. Sure, some startups succeed through bootstrapping. However, capital raising is necessary for most early-stage small companies to start and scale quickly.

Raising capital is very substantial to growing a business. The solution for most startups and founders is to raise money by selling off their equity. However, giving up your company’s equity ownership can be challenging. But, there are ways to raise possible capital without giving up equity.

Here are some methods on how to raise capital for your business:

Family and Friends

This is the most common way to raise money for a business without sacrificing equity. Family and friends are often willing to help a loved one, especially if they think the company has potential.

If you need just a tiny amount of money, this is a great way to raise sufficient capital and will not require creating any formal legal documents. The drawback of this approach to raising money is that you may not want to put your family and friends in a difficult position if the business fails.

Grants

The application for government grants starts from $500 to $100,000 for a small business. The government wants to see how your small business can create jobs and stimulate the economy, highlighting these points in your application.

You may apply for federal, state, and local grants if you take out a loan to raise capital. You may be eligible for funding through the Department of Veterans Affairs if you’re a veteran.

The disadvantage is that providing rapid success isn’t always possible in these uncertain times. But unlike getting funding from an angel investor or a venture capitalist, you don’t have to give up shares of your company.

Crowdfunding

With crowdfunding, you set a target amount of money you would like to raise, and people can donate any amount towards your goal. It is a great way to raise funds for a business because it doesn’t require you to give up equity ownership in your company.

Crowdfunding is most successful when combined with good social media skills and creativity. It will take a significant amount of work to pique the interest of possible investors.

Creating professional films and producing attention-grabbing marketing materials to show investors why they should invest in you are just a few ways to do it.

Several crowdfunding platforms help a business owner raise capital, such as Kickstarter and Indiegogo, which connect startups with investors. These investors get presents or the opportunity to be involved in the company’s inception.

Small Business Loans

The availability of a small-business loan may be helpful to your company. But only if you can show that it satisfies specific criteria: a firm must have been in operation for at least two years and generate at least $100,000 yearly before establishing eligibility. If you can get a loan from this method, it will be a great addition to your business. 

Unlike venture capital funds and angel investment, you don’t have to give up your business shares.

Initial Coin Offering (ICO 2.0)

Because blockchain firms are raising a lot of money, ICOs have become visible. However, many ICOs have been the subject of the government investigation.

While the regulations and rules around ICOs are fluid, startups may still legally utilize them to gain access to funding – essentially, they’re doing it the same way as crowdfunding. People are now calling this new method “ICO 2.0.”

If you’re interested in this path, you must contact securities attorneys or utilize a familiar platform with the regulatory environment.

A great example is StartEngine. Founders can issue a non-convertible preferred class of shares that pays dividends and does not dilute equity using their SEC-compliant turnkey ICO solution. Investors receive a revenue share rather than venture capitalists who get equity. Unlike equity financing and private investors, you don’t have to give up your company’s equity. 

Debt

It is a very effective method of raising funds in that you will not give up equity ownership in your company, but it requires well-organized financials. It can be a short-term bank loan, lines of credit, purchase order factoring, etc. 

You may also borrow against your company’s assets, such as real estate, equipment, or intellectual property. 

It’s essential to have a detailed business plan for this type of loan because the lender needs to understand how much money is required and how you can use it. This method can benefit businesses trying to expand or need more capital than their business can provide. 

Revenue-Based Financing

Obtaining startup capital without putting up any stock is reliable and generally available with revenue-based financing. A track record of monthly recurring revenue (MRR) is required. When a business succeeds after receiving funding from these mid-sources and needs an extra push, RBF is the next logical step. 

The process is relatively simple after the proper paperwork filing, unlike finding angel investors, institutional investors, and venture capitalists and convincing them. In addition, RBF does not require any equity to be given up instead of raising money from venture capital firms. 

Contests

One of the most innovative methods for achieving funding is through contests, where entrepreneurs propose a vision or business strategy. Pitching competitions might include monetary rewards, guidance, and business collaboration chances.

Although this isn’t the most dependable funding source, it is still a great way to network and connect with potential investors, develop a company concept, and practice making a pitch.

Conclusion

With these methods, you can raise capital without giving up equity ownership in your business. Have complete control of your company and how you want to run it by raising capital without giving up a stake in your company. Now that you’ve found how to raise money, go and make the best of what you have!

Need more strategies to raise capital for your business without giving up equity? Check out The Fully Funded Method today.