Rethinking Capital – Exploring Alternative Funding Paths for Small Businesses
- Aug 7, 2025
- 3 min read
Written by Priscilla Idahosa, Founder
She is the founder of Khyte, an online platform helping small entrepreneurs access community-driven funding and support.
For many entrepreneurs, the journey from idea to execution is paved with a common barrier: lack of capital. Traditional funding sources such as venture capital, bank loans, and government grants are often difficult to access, especially for early-stage startups, solo entrepreneurs, or small businesses from underserved communities. As a result, a growing number of business owners are turning to alternative funding options to bridge the gap.
The limits of traditional funding
While venture capital remains a popular source of startup capital, it comes with limitations. VC firms typically seek high-growth tech companies with scalable models and strong exit strategies. As a result, businesses in retail, food service, creative industries, or social ventures are often overlooked. Meanwhile, small business loans and grants are becoming increasingly competitive, with stringent credit requirements and slow processing times. Many first-time founders, or those without collateral, find themselves locked out entirely.
The rise of alternative business funding options
Alternative funding gives entrepreneurs creative and accessible ways to raise capital, often bypassing the traditional gatekeepers. Here are a few notable paths:
Crowdfunding platforms: Platforms like Kickstarter, Indiegogo, and GoFundMe allow businesses to raise money from the public by offering rewards, pre-orders, or project updates. Crowdfunding can validate ideas and create early customer loyalty.
Community-based platforms: Platforms like Khyte offer a community-driven approach, where everyday people can discover and support small businesses and local projects they believe in. Khyte allows founders to create listings, get discovered, and connect with values-aligned supporters who may contribute funding, mentorship, or services.
Revenue-based financing: Instead of giving up equity or taking on fixed debt, businesses repay a percentage of future revenue. This model is flexible and grows in proportion to business success.
Peer-to-peer lending (P2P): Online platforms like LendingClub or Funding Circle match entrepreneurs with individual lenders willing to fund their ventures, often at more favorable rates than traditional banks.
Angel investors: Unlike VC firms, angel investors are often individuals who back businesses in their early stages. They may provide capital, mentorship, and connections without the pressure of immediate exponential growth.
Business incubators and accelerators: These programs often provide early-stage funding, mentorship, office space, and resources in exchange for a small equity stake. They also open doors to a network of advisors and investors.
Grants for specific demographics: There are numerous grants aimed at minority-owned, women-owned, or veteran-owned businesses. While competitive, they can provide crucial non-dilutive funding for those who qualify.
Matching the right strategy to your business
Choosing the right funding option depends on several factors, such as your business stage, financial needs, industry, and long-term goals. For instance, a product-based business may benefit from crowdfunding, while a service business could explore peer lending, community funding via Khyte, or revenue-based models.
Entrepreneurs must weigh the trade-offs between equity dilution, repayment terms, and control. The right funding path isn’t necessarily the most popular one; it’s the one that aligns with your vision and values.
Looking ahead
As financial ecosystems evolve, alternative funding models are becoming more mainstream. They’re not just a second option; they’re a powerful first step for founders who want to stay in control, scale sustainably, and build businesses on their own terms.
With more platforms, tools, and networks focused on inclusive finance, like Khyte, the future of small business funding looks more flexible and equitable than ever before.
Read more from Priscilla Idahosa
Priscilla Idahosa, Founder
Priscilla Idahosa is the founder of khyte.com and khyteafrica.com, platforms helping small businesses, startups, and community projects get support without chasing VCs or banks. She knows firsthand how tough it is to build a business from scratch without outside funding. That's why she created Khyte, to help entrepreneurs get the support they deserve from their communities. She shares on bootstrapping, alternative financing, and building from the ground up.
