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What is the best source of funding for a LLC?

The “best” way is relative to your situation but I’m happy to list some ways LLCs can receive funding. However, it’s definitely worth noting that an LLC is not a great entity for owners looking for funding because it doesn’t really allow for shareholders. Many institutional investors like venture capitalists (VCs) have a framework that does not even allow them to invest in LLCs. So if you haven’t formed your company yet then think about going with a C or S-Corp. If you’re past that point you can either convert your LLC to a corporation (although it can be an arduous process) or find funding for your LLC in other ways, including:

  • Bootstrap it yourself. Self-funding from your savings is always preferred as you don’t have to give up any of your ownership.
  • Ask your “friends and family.” This can be a risky source as business relations can affect your personal relationships, yet they can be some of your biggest supporters and open to attractive terms for repayment.
  • Find a major customer to front the beginning the costs
  • Use a crowdfunding website like Fundable. Make sure you read the fine print in your agreement with the various sites.
  • Loans through the U.S. Small Business Association. A lot of different options here, and historically a solid option for small businesses.
  • Credit cards / mortgage your house.
  • Peer-to-peer lending on a site like Propser. Like crowdfunding sites, read the fine terms.

Hope that helps! If you need some sound legal advice during your fundraising then feel free to stop by LawTrades!

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