Raising capital is one of the more difficult practices startup founders encounter in our current tech/entrepreneurial ecosystem. I've been covering startups and how entrepreneurs scale their companies for a while now, and I've noticed that while there's a seemingly limitless number of development or marketing courses available, there's very little out there that teaches people the nuts and bolts of how to raise funds.

Founder teams may usually be composed of talented people with great ideas, but they aren't born with the resources or the connections to raise money. That has to be acquired or learned. Generally, entrepreneurs turn to angel investors and venture capitalists when raising seed or major funding rounds. Some try to secure loans from banks or other financing institutions in order to cover operational costs or expansion.

None of this is easy, especially for entrepreneurs who haven't done it before. Some startup founders decide to "go their own way" by bootstrapping their projects in the short term and finding additional capital at a later stage when the business has already gained traction. While this ensures the founder has more control over the business, this is not always affordable or feasible.

For businesses on a path to growth, or for when money becomes tight, small businesses still have other avenues to turn to for raising capital.

Accounts Receivable Factoring

Businesses with solid operations tend to build a strong accounts receivable from customers for services delivered or products sold. From an accounting perspective , this isn't as liquid as cash however, and you can't use it for short-term needs. There are ways to get around that.

One convenient solution to boost one's cash flow is accounts receivable factoring, in which a business essentially sells its billables to a third party at a discount. This can be dealt directly between companies or through bidding platforms like CBAC Funding, which provides businesses real-time quotes from dozens of invoice financing companies. Even banks like Wells Fargo provide accounts receivable factoring services, which cater to existing corporate clients.

Factoring can be a win-win situation for all parties involved. A business receives cash and off-loads its accounts receivable, while the invoice financing company then gets a potentially higher return for its billables. Meanwhile, debtos may have the opportunity to negotiate terms with the financing institution.

Crowdfunding

I haven't always been the biggest fan of this method as a stand-alone funding option, but it certainly has proven successful before and many established companies use it now to launch new products. Crowdfunding was initially done in exchange for a number of rewards and privileges, such as early access to products or introductory prices through platforms like Kickstarter and Indiegogo.

Most fundraising platforms revolve around product-based rewards, but the 2012 Jumpstart our Business Startups, or JOBS Act, introduced provisions that eased regulations on public offerings for startups and small businesses, which many hope will popularize equity crowdfunding as a means of funding businesses.

This means that aside from just reward-based crowdfunding, accredited investors can now contribute to raising capital in exchange for company ownership. This is likewise possible through platforms like Crowdfunder, Fundable and StartupValley, which allow small businesses to raise equity from the public in small increments. One of my favorite online platforms for this type of thing is AngelList, which lets you follow well-known investors and even become a member of syndicates backing companies they invest in.

Small Business Grants

Another avenue for raising funds is through small business grants. These can come from either government institutions or the private sector, depending on the industry, scope and capabilities of the entrepreneurs.

The United States government usually provides grants for educational and non-profit use, but it also occasionally provides grants for small businesses through the Small Business Administration. Other governments are also grant-friendly in terms of providing funding for startups. For example, Singapore's Media Development Authority and the National University of Singapore both provide grants to technology startups that meet its eligibility criteria, in partnership with startup incubators, accelerators and other private sector organizations.

Startup Accelerators

Another option for funding startup growth and expansion are startup accelerators. Institutions like Techstars, Y Combinator and AngelPad support startups that have already exhibited traction, but need assistance in further expanding.

Accelerators provide mentorship from experienced financiers and entrepreneurs, and many people working at these organizations have graduated from their own successful startup exits, acquisitions or IPOs. Accelerators are picky though. They often only accept companies with founders they particularly like, or that have some level of traction already. Being part of an accelerator program also requires some form of equity as an exchange for mentorship, funding and assistance, so it's not for everyone.

A Growing Market

The market for small business funding is a big one. This year, for instance, equity crowdfunding alone is expected to raise over half a billion dollars for startups and small businesses. The global crowdfunding market is projected to reach $34.4 billion this year too. No one is exactly sure how long the boom in startup funding will continue, but it's certainly not stopping yet. Therefore, if you'd like to avoid the more traditional method of approaching VCs and selling them on your business, right now may be the perfect time for you to consider a more alternative method.

Published on: Aug 17, 2015
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.