All new businesses can benefit from a dose of financing, but the number of options may make deciding which to pursue difficult at first. To help you sift through your available choices, this post goes over the basics of several types of financing.

Angel Investors

Many startups receive a significant portion of their funding from angel investors—that is, well-to-do individuals who inject money into a company to get it off the ground and/or provide continual support. Entrepreneurs often find angel investors among their families or friend circles. To learn more about angel investors, check out this Investopedia article.

Invoice Factoring

Factoring is a financing setup through which a lender buys outstanding invoices from the borrower at a certain percentage of their value. The upside for the lender is the strong possibility of long-term profit, while the borrower receives an immediate injection of cash and, in many agreements, the benefit of no longer needing to pursue payment on the invoices.

Business Grants

New businesses that can obtain grants enjoy a huge advantage: Grants provide what is “essentially free money,” as Business News Daily puts it. Sources of grants include nonprofit organizations, government entities, and certain for-profit organizations. The application process is lengthy, but the payoff is tremendous if your business is approved.

Bank Loans

Loans from traditional banks are attractive—if difficult-to-obtain—option for new businesses. These loans usually have low-interest rates, but those are paired with high rejection rates and somewhat lengthy application processes. If you decide to go this route, consider going with a small, community bank. Those tend to have higher approval rates.

Business Lines of Credit

New businesses may also seek to open a line of credit. These give access to a reservoir of money from which the business can withdraw money as needed (until they reach the credit limit). After money has been withdrawn, the borrower makes regular payments to restore the reservoir.

Want to talk to a specialist about your business’s financing options? Just get in touch with LMC Alternative Business Capital.