Cayce Clifford
- Traditional forms of funding, such as venture capital, can be hard to access.
- Insider spoke with small-business leaders about the less-conventional ways to fund a new business.
- One founder told Insider she used credit cards to support her business growth.
- This article is part of "Starting Up Your Small Business," a series exploring steps small-business owners can take when starting out, transitioning, or scaling up.
Figuring out how to fund a new business can be one of the hardest challenges of starting up.
Accessing traditional forms of funding, such as venture capital and bank loans, is becoming more difficult, Elizabeth Gore, the president and a cofounder of Hello Alice, a small-business-support company, told Insider.
"Cash is getting more expensive, and for women, people of color, and US veterans, equitable access is quite difficult for a myriad of reasons," she said.
Given the economic uncertainty of the past few years, it's wise for founders to think about diversifying how they are getting the money to support their growing businesses.
"When you look at financing a company, equity investors are not your only option," David Manshoory, cofounder and chief operating officer of the beauty company Alleyoop, said. "There's an entire capital stack of funding options."
Insider spoke with three small-business owners about funding options that helped them grow.
Consider low APR, high-reward credit cards
When starting her hair-accessory brand, Curlfriend Collective, in late 2021, Chloe Homan knew she didn't immediately want to raise money because she wanted more autonomy and time to slowly understand her market.
But she had only about $6,000 to invest — not enough to get her product-based business off the ground.
Instead of getting a loan, she decided to turn to credit cards, with a focus on using them in a way that would support her business growth — allowing her to pay for things including consultants and manufacturing orders before she had the cash on hand — without weighing her down with debt.
Photo courtesy of Curlfriend Collective
For instance, she secured one credit card from a local bank that offered her 18 months with a 0% annual percentage rate.
"To me, that's basically a small-business loan," Homan said, adding that it was preferable to a traditional loan, where she would've needed to prove consistent business income, with interest starting to accrue immediately.
Homan told Insider she budgeted carefully each month to ensure she paid off the debt before a higher APR kicked in. She said she would also consider jumping to another card with a 0% APR intro offer.
"You've got to play the system a little bit," she said.
She also looked for cards that offered benefits that could support her business growth. Her Delta Amex credit card offers an extra percentage back on all shipping costs, and she's been able to use those points, plus her line of credit, to access better product-photography locations.
"We took the majority of our team down to Belize for our big summer shoot in the spring," she said. "The majority of that was paid with points — otherwise, we wouldn't have been able to afford the whole thing."
Thanks to this approach, Homan saw 26% year-over-year growth during the first half of this year, while retaining full ownership of the company.
Tap into government money
While Manshoory of Alleyoop did raise venture capital to help grow his beauty brand, he knew that exploring funding options outside debt and equity could benefit his business. That's why he was excited when the team at Gusto informed him that his company might be eligible to receive federal research-and-development tax credits.
Manshoory told Insider he didn't realize that the work the company put into developing those products could be considered R&D.
Photo courtesy of David Manshoory
"When I think about R&D, I think about science and laboratories," he said. "Our brand is all about innovating on packaging designs and beauty to make products multipurpose and multifunctional — many times we're creating something that the world has never seen before."
Since 2017, Alleyoop has received over $200,000 back in R&D tax credits, which Manshoory could access without giving up any additional equity or having to hustle to sell extra products.
"A quarter of a million dollars can do a lot for a startup," he said. "It helps us reinvest back into launching more new products more quickly. It helps us grow our team. It helps us support our marketing budget."
Get creative with your personal assets
While all business takes personal sacrifice, Olivia Dreizen Howell and her sister took things to a new level when it came to funding their business, Fresh Starts Registry, which supports people looking for new beginnings.
About the time they were exploring the venture-capital route and feeling disheartened by the lack of support for female-founded businesses, Dreizen Howell was also selling her house after getting a divorce. Instead of buying a new one, she decided to move back in with her parents, along with her two sons.
"A lot of people sell a house and buy a house, and I'm selling a house and building a business," she said, adding that the decision gave the business about a year of the cash it needed for operations, as well as the mental and emotional support of not having to worry about money.
"If I had stayed where I was and we bootstrapped, I would have had to take on a lot more and wouldn't have the time to invest in building Fresh Starts," Dreizen Howell said.
Terrie Alfieri Photography
While it was a hard decision to make, she felt it was an important bet on her business and her future.
"I'm assuming that the business is going to take off and make more money, so I can have a house that I decide to have someday," she said.
Though there is no one-size-fits-all way to fund a company, Dreizen Howell advises founders to think big about the possibilities.
"People get very narrow-minded when they think about building a business," she said. "Think about all the different ways that you could bring in money to your company."