Securing funding is one of the biggest hurdles for startups. The usual suspects—venture capital and traditional bank loans—tend to dominate the conversation, often making entrepreneurs feel like these are the only viable paths. But the reality is quite different. There are several alternative funding options that, while less publicized, can be just as effective—sometimes even more so—for early-stage or niche ventures. For example think about revenue based financing.
A recent review of The Funded Trader program highlights how many entrepreneurs are turning to unconventional methods to support their business ventures. From peer-to-peer lending to revenue-based financing, founders are getting more creative in how they bankroll their ideas.
Here’s a look at some often-overlooked funding options that might be a perfect fit for your startup.
1. Peer-to-Peer and Personal Lending
If traditional banks are a no-go, peer-to-peer (P2P) lending and personal loans can be a quick and accessible option.
What is P2P Lending?
It’s a method of borrowing money directly from individuals through online platforms—cutting out the bank as the middleman.
Pros
- Faster approval process
- Flexible terms
- No need to give up equity
Cons
- Interest rates can be high
- Personal liability if the business fails
Popular platforms
- LendingClub
- Prosper
- Upstart
This option works best for startups with smaller capital needs or founders with strong personal credit histories.
2. Crowdfunding—Beyond Just Kickstarter
Crowdfunding is a familiar concept, but there’s a lot more to it than Kickstarter and Indiegogo.
Types of Crowdfunding
- Reward-based: Supporters receive a product or perk (e.g., Kickstarter).
- Donation-based: Contributions with no expectation of return (e.g., GoFundMe).
- Equity-based: Investors get a small ownership stake in your company (e.g., SeedInvest, StartEngine).
Why it’s powerful:
- Validates market demand
- Builds a community around your brand
- Offers marketing exposure alongside funding
Tips for success
- Create a strong, relatable pitch video
- Be transparent with budgeting and timelines
- Offer compelling incentives
Equity crowdfunding, in particular, is gaining traction among tech and consumer product startups.
3. Revenue-based financing
Revenue-based financing (RBF) is ideal for startups that generate income but want to avoid giving up ownership.
How it works
Instead of fixed monthly payments, you pay a percentage of your revenue until the investment is paid back—plus a predetermined return.
Benefits
- No equity dilution
- Payments scale with business performance
- Quicker approval than traditional loans
Things to consider
- Can be expensive over time
- Not ideal for seasonal or unpredictable revenue
Popular platforms
- Clearco (formerly Clearbanc)
- Pipe
- Founderpath
If you’ve got steady monthly revenue, this flexible funding model might be worth exploring.
4. Grants and Startup Competitions
Free money? Yes, it’s possible.
Grants and competitions are often ignored because they seem too competitive or complicated—but they can be incredibly valuable, especially for mission-driven startups.
Where to look
- Government grants (local, state, federal)
- University incubators
- Corporate-sponsored challenges
- Nonprofit foundations
Advantages
- No repayment or equity loss
- Often come with mentoring, exposure, and networking
- Helps validate your business concept
Tip: Start small—local economic development offices often offer grants with less competition.
5. Corporate Partnerships and Strategic Investors
Large companies are increasingly funding startups aligned with their industry to fuel innovation and secure future collaborators or acquisitions.
Examples
- Google for Startups
- Amazon Launchpad
- Coca-Cola’s Founders Program
What they offer
- Funding or service credits
- Mentorship and technical support
- Exposure and credibility
These opportunities are often best for startups in tech, logistics, sustainability, or consumer goods spaces. Just be sure there’s strategic alignment—these companies are looking for synergy, not just profit.
These relationships can also open doors to co-branding opportunities, pilot programs, or early access to new technology and resources. For example, a food startup might get distribution support from a major grocery chain, while a health tech company could gain credibility by collaborating with a leading hospital network.
Even if the corporate partner doesn’t invest capital upfront, the strategic value of such partnerships can be immense—helping startups grow faster, improve their product, or enter markets that would otherwise be out of reach. Think of it as smart scaling with the backing of an industry heavyweight.
6. Friends, Family, and Sweat Equity
These traditional methods might not be flashy, but they’re often the most accessible and realistic—especially in the early stages.
Borrowing from Friends or Family
- Pros: Trust, flexible terms, faster access
- Cons: Can strain personal relationships if the business struggles
Tip: Treat it like a formal investment—use contracts and clarify expectations upfront.
Sweat Equity
If you can’t afford to hire talent, offering equity in exchange for work (like design, development, or marketing) can move your business forward without spending cash.
- Works best when collaborators believe in the vision
- Make sure equity splits are fair and legally documented
7. Incubator and Accelerator Programs
Incubators and accelerators can be game-changers for early-stage startups—not just in terms of funding, but also through the access they provide to mentors, industry networks, and hands-on guidance.
What’s the difference?
- Incubators are typically for very early-stage startups. They offer long-term support (6–24 months), including workspace, mentorship, and sometimes small seed funding.
- Accelerators are short-term, intensive programs (usually 3–6 months) designed to rapidly grow startups with a product in market. These typically end in a demo day where startups pitch to investors.
What they offer
- Seed capital (often in exchange for 5–10% equity)
- Structured training and business support
- Investor and mentor access
- Peer founder networks
Top programs
- Y Combinator
- Techstars
- 500 Global
- MassChallenge
- Plug and Play Tech Center
These programs are competitive, but if accepted, the resources and exposure can put your startup on a faster path to success.
Final Thoughts: think beyond the obvious
If you’re a startup founder, it’s easy to feel like the funding world is limited to pitch decks and investor meetings. But the reality is that there are many alternative funding options—some of which don’t require you to give up ownership or go into debt.
Whether it’s peer-to-peer lending, equity crowdfunding, or joining an accelerator, choosing the right funding path comes down to understanding your business model, growth stage, and goals.
The good news? The startup world is more flexible than ever. By thinking outside the box and being open to nontraditional routes, you just might find a funding source that fits your business better than the “mainstream” options ever could.
