One of the biggest challenges of launching a new business is finding the cash to get things started. Fortunately, there are options besides winning the lottery or receiving a large inheritance, including small business loans, credit cards, bootstrapping with retirement savings, seeking private investment, and crowdfunding.

Before we examine the various funding sources, here is some general advice on preparing to finance your business pursuits.

1. Do Your Homework

Before you approach any outside source for business financing, take the time to work out a business plan that includes expenses, projected sales, and profits.

Be enthusiastic about your business, but ruthlessly realistic about your financial picture. Optimism is great, but wishful thinking has no place in a business plan.

Don’t ask for more money than you need, be prepared to explain how you’ll use the funds and what the reasoning is behind those choices.

Once you’ve got your pitch clear in your mind and are prepared to share your vision, consider one of the following strategies for funding your venture.

2. Seek a Small Business Loan

Small business lending from local banks and sacco is a time-honored driver of small business growth. Those institutions are still a good potential source of funding, and they’ve been joined in recent years by online vendors that also extend credit to entrepreneurs.

When seeking a small business loan, here are some considerations to keep in mind:

• Be prepared to offer collateral. If your business is new and lacks significant capital assets, lenders may expect you to put up your home or other holdings as security in case you cannot repay the loan. The risks of doing so are obvious and significant, but if you’re prepared to do this, lenders will see it as the willingness to bet on yourself.
• Look for lenders based in your community (as opposed to national banks with branches in your city or town), which are likely to seek opportunities to support local businesses.
• If local sources don’t pan out, consider using one of the many online lenders that offer small business loans. Applying online may not afford much opportunity to share your enthusiasm, but opportunities are there for sound businesses.

3. Use Credit Cards to Start Your Business

Tales of startup CEOs maxing out their credit cards to bootstrap new businesses are ubiquitous. There’s an element of truth in those stories, but there’s also a heavy dose of risk that’s easy to overlook.

Before you pull out your personal card, consider applying for a corporate card. Even if your company is new, and doesn’t have documented sales and profits, you may qualify for a corporate credit card at least a modest credit limit in your company’s name.

4. Enlist Private Investors

Persuading others to share your dream and back you financially is a popular tactic for obtaining business funding.

Work with legal counsel (and possibly a business mentor) to clarify the roles you are prepared to let individual backers play (or not play) if they agree to provide you with funding. Get it all in writing, and do all you can to set clear realistic expectations.

Family and Friends

Perhaps the most tried-and-true funding source for budding businesspeople is family and friends. There’s often built-in trust and support from family members, and fewer “strings attached” than with other potential investors. Nevertheless, funds from familiar sources should be treated strictly as a business. Handling those funds with professionalism can help preserve the personal relationships behind them.

When accepting funds from a friend or relative, be clear about whether you’re seeking a loan or offering a stake in your company.

• If you’re treating a family contribution as a loan, specify how much you need, what you’re prepared to pay in interest, and how you plan to repay the debt—in monthly installments, a lump sum after a set number of months, etc. Whatever plan you settle on, be sure to honor it scrupulously.
• If you’re offering a stake in the company, spell out what percentage of company equity the investment will equal, the earliest the investor can expect to cash out their stake (e.g. in five years), and whether or not they’ll have any voice in business decisions.

Angel Investors

An “angel” is a businessperson who provides financial backing to companies they think will prosper, with the expectation that they will share in its financial rewards. Under the best of circumstances, an angel brings relevant experience and provides valuable advice that helps expand the business. In less auspicious relationships, angels and company founders clash, to the detriment of the company and its financial stability.

Angel investors will likely expect a detailed accounting of the company’s financials and plans for building the business. They also are unlikely to be content with a passive “silent partner” role in company management, so it’s important to clarify up front the nature of their involvement in company decisions:

• Will they be consulted on all decisions, for example, or only decisions involving finances?
• Do they get a vote on new hires, relationships with partners, vendors, or customers?
• How often will they be briefed on the progress of the company, and when will they have the option to cash out?

5. Pursue Crowdfunding

Crowdfunding websites like Kickstarter, in which individuals can support companies or projects through small contributions, have helped many businesses get off the ground—and they’ve also collected money for projects that sputtered out. You may be successful with one if you keep your goals realistic, create a compelling case for why your product deserves funding, and inspire supporters to recruit their friends to your cause.

Here are a few guidelines for a mounting a successful crowdfunding campaign:

• Be prepared to offer supporters premium items to thank them for their support. Traditionally items of modest value are offered for small donations, and items of increasing worth are promised for contributions of larger size. If you go this route, know the prize(s) you plan to give away for each contribution level, and factor the cost of the items (including shipping) into your fundraising goal so that the program can pay for itself.
• Pay close attention to the rules of the site. Understand the way crowdsourcing sites handle campaigns that fall short of their target goals. Some sites forward funds to you whether you make your goal or not. Others return contributions to donors if the fundraising goal is not reached.
• Know the fees the sites charge for processing your campaign, and make sure you factor them into your financial goal.
• Recognize that you’ll need to promote your campaign. Spread the word using social media, bulletin boards (online and in the real world), newsletters for churches and clubs, presentations to civic organizations and business-networking groups, etc. Update the campaign page frequently, and follow up with contributors and encourage them to tell others about your campaign.

6. Bring Passion and Persistence

Whatever your entrepreneurial goal may be, one of these avenues can help you achieve it. Decide which one suits you best, and pursue funding with passion and persistence.

If one source of funding turns you down, do all you can to try to learn what went wrong. Then adjust your application and apply elsewhere. If you keep going and don’t give up, you may be pleasantly surprised by how many people and institutions are willing to support your dreams.