Pre-Seed Funding

Founder Funding (a.k.a. Bootstrapping)

Bootstrapping is the term for when you, the owner of the company, invests some of your own money into the business either in the form of cash or collateral. When it’s time to seek additional funding such as bank loans, this sort of funding shows that you have put “skin in the game” and proves that you have a long-term commitment to your project.

Pros:

• You maintain full ownership of your company, as well as full control of decision-making and strategy.
• You avoid taking on early debt requirements

Cons:

• Slower pace. It can take a longer time to grow your business through bootstrapping. In the meantime, someone else may beat you to it, or you may eventually learn that your model doesn’t work.
• Inaccessible to many people. Founders without a lot of personal savings or assets may not have the money available to fund their new business.

Best For:

Pre-seed, ideation phase, and early-stage businesses and entrepreneurs focused on research and development for initial product or MVP

Learn more:

• The Pros and Cons of Bootstrapping Startups (Forbes, 2019)
• 10 Benefits of Bootstrapping Your Startup (Divvy)
• Bootstrapping (CFI, 2022)

Friends & Family

One of the most common ways to fund your new business when you’re just getting started is by asking family and friends for money or capital.

Pros:

• It can be an available funding option for very early-stage businesses when other avenues are limited
• Less formal, time-consuming, and costly to obtain funds as compared to institutional or private investing
• You can lean on your personal relationships and build a supportive network around your business
• Friends and family funding can be considered capital if you’re seeking a future bank loan

Cons:

• Friends and family may have limited knowledge of early-stage businesses and investment
• Money is usually expected to be repaid as your business profits increase
• Equity in your business is a common ask
• The entanglement of business and personal relationships
• Friends and family investors may feel entitled to criticize your business decisions
• Inaccessible to many people as you may not have a network of family and friends with the capacity or interest in investing

Best For:

Pre-seed, ideation phase, seed funding, and validation

Learn more:

• Pros & Cons of Having Family Investors (Pitch Deck Fire)

Loans

Small and medium-sized businesses often receive funding through bank loans. Entrepreneurs with a solid business plan and good credit are likely capable of receiving a bank loan.

Another option is microloans which are small, low-cost loans provided by a Community Development Financial Institution (CDFI) or similar organizations that provide resources and support services to small businesses. In the Traverse City region, two options for microloans are:

• Venture North
• Northern Initiatives

Pros:

• You still own virtually 100 percent of your company
• You’ll receive cash to grow your business

Cons:

• Bank loans may be difficult to get due to asset and security requirements. Also, your personal credit may be needed to back the loan
• There are hard deadlines and interest rate for payments

Best for:

Pre-seed, ideation phase, seed funding, validation, Series A, companies with early-traction, and scaling startups

Learn more:

• 10 Things a Bank Will Ask when you Need a Business Loan (Bplans)
• How to Get a Bank Loan for Your Small Business (Business News Daily, 2023)