How to fund a business

Let us be real. Starting or growing a business can feel overwhelming, especially when it comes to money. You might be thinking, “Where do I even start?” or “How do I fund this without risking everything I’ve got?” If that sounds familiar, you are not alone.

The good news is that you have options. Whether you want to keep full control or you are open to bringing in partners, there are smart and simple ways to finance your business. No complicated terms, no confusing jargon, just real, practical advice you can use.

I will try to walk you through the most common funding options in a way that is easy to understand. Ready to explore what is out there and find the right financial path for your business? Let me get into it.

What Does “Financing a Company” Mean?

The best way to make sense of these complicated terms is through real life examples. Imagine you have a business idea. It’s a food truck, an online store, or a landscaping service. Whatever it is, you are excited and ready to get started.

But then reality hits, you need money. Not a ton right away, but enough to:

• Buy equipment
• Set up a website
• Pay for licenses
• Buy inventory
• Market your stuff
• Maybe even hire someone

This is where financing comes in. It is just a fancy word for “How do I get the money to make this thing happen?”

Now, this money can comes from various places - your own savings, your grandma, the bank, or even some investor who thinks you are onto something big.

Let me break down the two main types of financing in the simplest way possible.

1. Equity Financing ("I’ll give you a piece of my business if you help fund it")

This is when you exchange a share of your company for capital. In simple terms, you are saying,"I’ll give you part ownership of my business if you invest money to help it grow.”

Instead of lending you the money, they become your partner - financially, and sometimes even strategically.

Example:

Let me say you are starting a coffee shop. You need 100,000 € to open your doors.
A friend of yours says, “I believe in you. I will give you the 100,000 € but I want 20% of the business.”

Boom. That is how equity financing works.

Now, that friend owns 20% of your shop. If the business makes a profit, they get 20% of it. If you ever sell the business, they get 20% of the sale. But if the business crashes and burns? They do not get their money back. They take the risk with you.

Common Sources of Equity Financing:

• Angel Investors: wealthy individuals who invest in early-stage businesses (think: someone who made money elsewhere and wants to support startups).
• Venture Capitalists (VCs): firms or groups that invest larger sums in companies with high growth potential (think tech startups).
• Friends & Family: a lot of businesses start with money from loved ones, and if they get a share of the business, it is equity.

Trade-offs

One of the biggest upsides to equity financing is that you do not have to repay the money. If your business hits a rough patch or takes longer to make money, you are not on the hook to start cutting checks.

Another huge benefit is that you might get an investor who brings more than just cash to the table. They could offer advice, industry connections, or open doors you could not get through on your own.

But there are trade-offs. The moment you give someone a piece of your business, you are also giving them a say, even if it is small. You are not the only decision-maker anymore. And when the business starts making money, your profits are not 100% yours anymore either. You are now sharing the piece of that pie.

2. Debt Financing ("I’m borrowing the money, and I’ll pay it back with interest")

This is the classic way to finance your business. You borrow money and agree to pay it back, usually with interest, over a certain period. The best part is you keep full ownership of your business, so there is no sharing profits or decision-making with anyone else.

Example: 

Say you need 50,000 € to buy landscaping equipment and a truck to get your business moving. You head to your bank and apply for a small business loan. The bank reviews your application and says, “Okay, you can borrow this money, but you will need to pay it back over five years with 7% annual interest.” So now you have a clear repayment plan with monthly payments. While you are making those payments, you still own one hundred percent of your landscaping company. That means all the profits and control are yours, no partners, and no investors.

Debt financing can be a great option because the terms are usually clear and predictable. You know exactly what you owe each month, which makes budgeting easier. But it is important to remember that you are responsible for those payments whether business is booming or slow.

Common Sources of Debt Financing:

• Bank Loans: Standard business loans from a traditional bank.
• Business Credit Cards: Good for smaller, day-to-day expenses, especially when you are just starting.
• Bonds: Larger companies can raise funds by issuing bonds to investors. A bond is an “I own you”: the company borrows money from investors and agrees to pay it back with interest on a fixed schedule.

Bonds vs. Loans:

A loan usually come from a single lender, like a bank, with negotiated terms. A bond, on the other hand, is sold to multiple investors and can be traded in financial markets. Bonds are more common for larger businesses or public companies, but the core idea is the same: borrow money and repay it with interest.

Trade-offs

The biggest advantage here is control. You borrow the money, you build your business, and if you make the payments, nobody tells you how to run it. Your business is fully yours - profits, decisions, the whole deal. Plus, repayment terms are usually straightforward and predictable.

However, debt does not care if you had a slow month. You still owe that payment, interest, and all. If you are just starting out or your credit is not great, it can be hard to qualify for a decent loan. In some cases, you might need to personally guarantee the loan, which means your own finances could be at risk if things go wrong.

3. Other Creative or Alternative Financing Options

All right, so maybe a traditional loan is not the right fit for you, or the bank has turned you down. Do not worry there are other ways to secure the funding you need to start or grow your business. Let me break down a few creative options that people (like you and me) are also using:

a) Bootstrapping – Using Your Own Money

This is the classic “using your own money” approach. It might come from your personal savings, extra income from a side gig, or even profits generated as your business grows.

The advantage is clear: you maintain full control; no one tells you what to do or takes a share of your earnings.

The downside is that building momentum can take time, especially if funds are limited.

b) Crowdfunding – Let the Crowd Help You Out

Heard of Kickstarter or GoFundMe? That is crowdfunding. You put your idea out there, and if people love it, they chip in a few bucks each. If a bunch of people like your project, it can really add up.

Best for: cool products, unique ideas, or causes people feel passionate about.
Bonus: you are building a fanbase while raising money.

c) Grants – Free Money (With a Bit of Paperwork)

Fortunately, there is a wealth of grants and funding programs, especially from the EU. These programs often focus on innovation, tech startups, sustainability, or regional development.

Some key sources to check out:

• European Structural and Investment Funds (ESIF): These support business growth, especially in less developed regions.
• Horizon Europe: Focused on research and innovation, perfect if your business involves tech or science.
• National programs: Many governments offer grants or subsidies for startups and small businesses - like the Croatian HAMAG-BICRO, Polish Agency for Enterprise Development (PARP) or Slovak Business Agency (SBA).

Heads up: There’s paperwork involved, but the money is free, so you do not have to repay it.

How To Choose the Right Funding Option for Your Business

So, you are thinking about how to fund your business - great! But now you are stuck at the crossroads, staring down all the options: loans, investors, even bootstrapping it yourself. It can feel overwhelming, especially when everyone has an opinion.

Do not worry. Let me break it down together.

Ask Yourself These 4 Simple Questions

Before diving into the details, ask yourself a few honest questions:

1. Do I want to keep full control of my business?
If you are the kind of person who wants to call all the shots, bringing in investors might not be your vibe. They will want a say in how things are run. Equity funding often involves giving up some control, so think carefully about how much influence you are willing to share.

2. Can I take on debt and realistically pay it back?
Loans can be a great option if you have a solid plan and steady income to cover repayments. But if money is still tight, taking on debt could just add stress. Also consider the time horizon of your project. Long-term project might not generate revenue quickly enough to meet repayment schedules. Accessibility matters too: while some loans are easy to apply for, others may require strong credit or collateral.

3. Am I okay with sharing ownership?
Equity funding means giving up a piece of your business in exchange for money. It can open doors to advice, connections, and big cash - but you will be sharing the pie. On the other side, you are not burdened with repayment timelines, which can be helpful for long-term ventures. Accessibility varies here as well: attracting investors can be time-consuming and competitive, especially for early-stage businesses.

4. Do I need the money fast, or can I wait a bit?
Some funding options take time (think: pitching to investors), while others, like loans or credit lines, can be quicker - depending on your credit and paperwork. The size of funding matter too: large-scale funding often takes longer to secure, regardless of the method. Think about how urgently you need the cash and whether you can afford to wait.

Your Business, Your Way

Starting or growing a business? Yes, it is tough. I know this well because I work at Finax, and I have seen firsthand how our founders, Juraj and Rado, began their journey in a tiny office under a highway overpass right here in Bratislava. Back in 2017, they had a simple but bold idea: make investing easy and available for everyone, not just the financial elite.

They did not walk in with piles of cash or get a big bank loan. Instead, they used Juraj’s savings, combined with some angel investor funding along the way, to keep things moving. This mix of bootstrapping, smart investments, and reinvesting what they earned helped Finax grow step by step.

From those humble beginnings, Finax became the first robo-advisor in the CEE region. Today, we manage over 1.1 billion euros for more than 93,000 clients who trust us with their money. But this did not happen overnight - it took grit, creativity, and a clear vision to get here. And we do not want to stop there, we have big plans for further expansion. So, what is the takeaway for you? Whether you are digging into your own savings, applying for grants through the EU or your country, trying crowdfunding, or even looking at flexible options like revenue-based financing, there is a way forward that fits your situation. The key is to stay open, be creative, and tap into the resources growing all around us.

Remember, every considerable success starts with a single small step - and that step is powered by belief and determination. Your business journey will be your own, but you do not have to do it alone. Lean on your community, use the support programs available in your region, and just keep moving forward.

So, take a deep breath, find the funding option that feels right for you, and get started today. Because the best investment you can make is in yourself and your ideas - and once you do, the possibilities are truly endless.