This is only an overview treatment of this question as many books have been written on this subject.
Funding can take the form of debt (borrowing with repayment including interest), equity (selling stock in the company, thus diluting ownership) or grants (very limited availability).
Many books recommend that you bootstrap your efforts in starting a business. Thus you spent the minimum necessary to get the business to the point of generating sales. Waiting to that point has the advantage that:
• With a proven business, customers are willing to pay you for your products/services. This is the least expensive form of funding for your Company.
• You retain more control over the business in that you don’t have to worry about meeting the expectations of the loan organization or stockholders.
• You don’t have the impact of cash outflow to repay the loan
• Fund requests before sales infers a higher risk to those providing the funds and thus they will extract a larger share of Company ownership or a higher interest on the loan.
When you do get to the point of needing funds, the following is a typical list of sources for most startups.
• Personal savings and credit cards
• Loans from or stock sales to friends and family (be sure to issue normal business documents for these, as if dealing with an outside party)
• Bank debt (this normally requires a personal guarantee risking your personal assets)
• Advanced payments from customers before delivery of product/service
• Crowd funding, either conventional or the new equity funding arrangement
• Grants from Governmental units e.g. Small Business Innovation Research (SBIR) grants, primarily for high tech businesses (see www.sbir.gov). Availability is based on the research needs of several participating Federal Agencies); Availability of grants for start-ups is very limited (but see www.grants.gov).
For personal funds invested, it is advisable to carefully determine the impact of the potential loss of these funds. The guide is to invest only what you could afford to lose. Nevertheless, investors will be reluctant to fund your Company unless you have invested sizably first.
One point of advice is that you focus on making your product or service a market success first before focusing on seeking funds. With that, investors will be much more interested in your company, seeing it as a lower risk situation for the Return OF their Investment as well as a Return ON their Investment.