---
title: "Sources of finance for new ventures: a decision map"
description: "Four groups of finance for a new venture, what each one costs, four crowdfunding types and a hypothetical example with dilution and loan arithmetic."
url: "https://staging.khoi.co.uk/en/blog/ban-do-nguon-von-khoi-nghiep"
lang: en-GB
author: "Lê Quốc Khôi"
date: 2026-11-03
updated: 2026-11-03
topics: ["Corporate finance"]
tags: ["Sources of finance", "Start-up funding", "Crowdfunding", "Equity and debt", "Bootstrapping"]
---

# A funding map for a new venture: what each source costs you

## Key takeaways

- The library groups thirteen sources of finance for new ventures into four: personal, equity, debt and creative sources. It credits the grouping to Barringer and Ireland (2018) (Barringer and Ireland, 2018). No group comes first.
- According to the UK Crowdfunding Association (UKCFA), crowdfunding backers can receive shares, their money back with interest, a reward, or nothing (UK Crowdfunding Association, n.d.). The page says nothing about regulation.
- In my analysis each group charges a different price: time, ownership, a repayment schedule with collateral, or duties to backers.
- Hypothetical example, every figure invented: to raise VND 600 million, workshop A would repay VND 711 million in total on a 36-month loan at 12 per cent a year, give up 25 per cent of its shares, or pre-sell 5,000 cartons.
- No source in the library covers interest rates, tax or the legality of each source in Vietnam. Check the current rules yourself.

You have put all your savings into the workshop, and a second filling machine still needs VND 600 million you do not have. Do you ask relatives, borrow from a bank, pitch an investor or run an online campaign? [Sources of finance for new ventures](https://staging.khoi.co.uk/en/framework/sources-of-finance-ladder) in the library lists those doors. This post adds what each takes from you.

## What groups of finance exist for a new venture?

The library sorts thirteen sources into four groups: personal sources, equity, debt and creative sources (Barringer and Ireland, 2018).

> **Figure:** [Sources of finance for new ventures](https://staging.khoi.co.uk/en/framework/sources-of-finance-ladder) Sources of finance for new ventures, as the library organises them.

It is a catalogue by group, not a ladder. The framework's web address still contains the word "ladder", but the library never says one group must come before another. Any ordering in this post is my own reasoning.

## What does each group of finance cost you?

Different things: ownership, a repayment schedule, duties to the people who put in money, and in every group, time. The figure is my analysis from basic finance logic; the library supplies only the names of the sources.

> **Figure:** (compare) All content in this figure is the author's analysis, not drawn from any source.

```json
{
  "type": "compare",
  "columns": ["Personal", "Equity", "Debt", "Creative sources"],
  "rows": [
    { "label": "You give up", "cells": ["Speed of growth; with relatives, possibly the relationship", "A share of ownership, often some say in decisions", "A fixed repayment schedule, usually with collateral", "Depends: goods owed to backers, fixed lease payments, a funder's conditions"] },
    { "label": "You must show", "cells": ["Backers who trust you; for bootstrapping, customers who prepay", "A market big enough for that stake to grow many times over", "Steady cash flow to cover repayments, and collateral", "An audience, or an asset with resale value, or a project that fits the criteria"] },
    { "label": "Usually breaks at", "cells": ["A spoken agreement each side remembers differently", "Dilution over several rounds; an investor who wants an exit sooner than you", "A slow month, with repayments still due and your own assets pledged", "A campaign nobody sees; a partner who holds the reins"] }
  ]
}
```

On equity, the library has two definitions. A [business angel](https://staging.khoi.co.uk/en/glossary#business-angel) is a wealthy individual who invests in young firms for equity or convertible debt, often adding connections. [Venture capital](https://staging.khoi.co.uk/en/glossary#venture-capital) is a professionally managed equity pool investing in high-growth firms and aiming for an exit. I infer that someone holding shares needs to see a way out, so a workshop that plans to sell steadily for decades will find it hard to persuade a fund.

Debt asks for no shares, but the repayment schedule does not shrink when sales fall. By basic finance logic that suits a business with steady cash flow and not one that cannot say what next month's sales will be. [Bootstrapping](https://staging.khoi.co.uk/en/glossary#bootstrapping), by the library's entry, means avoiding outside capital through thrift, used equipment, customer prepayments and shared costs.

## What do crowdfunding backers get in return?

It depends on the type. The UKCFA describes [crowdfunding](https://staging.khoi.co.uk/en/glossary#crowdfunding) as asking a large number of people for a small amount each, where finance used to mean asking a few people for large sums (UK Crowdfunding Association, n.d.). Backers receive shares, interest, a reward or nothing.

> **Figure:** [Four types of crowdfunding](https://staging.khoi.co.uk/en/framework/crowdfunding-types) Four types of crowdfunding by what the backer receives (source: UKCFA, undated; page read on 3 November 2026).

Taken from the founder's side:

- Equity: backers swap money for a share of the business; if it succeeds the value goes up, if not it goes down (UK Crowdfunding Association, n.d.). For you that means dilution.
- Reward: the UKCFA lists an acknowledgement on an album cover, event tickets, news updates and free gifts (UK Crowdfunding Association, n.d.); the library says "product or perk". For you it is a delivery obligation.
- Donation: backers believe in the cause and expect nothing back (UK Crowdfunding Association, n.d.). By basic finance logic it is a poor fit for a business that makes a profit for its owner.
- Loan: backers get their money back with interest, bypassing traditional banks (UK Crowdfunding Association, n.d.). It is also known as [peer-to-peer lending](https://staging.khoi.co.uk/en/glossary#peer-to-peer-lending). For you it remains debt.

One named example: the UKCFA says the first online crowdfunded project is thought to date from 1997, when American fans of Marillion raised US$60,000 for the band's US tour (UK Crowdfunding Association, n.d.).

The UKCFA page says nothing about regulation, so this post draws no legal conclusion for the UK or for Vietnam. No source in the library covers crowdfunding rules in Vietnam. Check the rules currently in force where you will raise money before you open a campaign.

## Workshop A needs VND 600 million: how do three sources compare?

**A hypothetical example.** Workshop A, its name and every figure below are invented by me to show the arithmetic. None is data from a real business. It bottles dipping sauce, employs 8 people and sells about 400 cartons of 6 bottles a month at VND 300,000 each, which is VND 120 million in monthly revenue. Profit before debt repayments is about VND 25 million a month. The owner has put in VND 300 million of personal money and needs VND 600 million more: 400 million for a filling machine, 200 million for ingredients and packaging.

**Borrowing.** Suppose VND 600 million over 36 months at 12 per cent a year, or 1 per cent a month (an assumption, not a market rate), with equal principal repayments and interest on the remaining balance. Principal is 600 ÷ 36 = VND 16.67 million a month. Month-one interest is 600 × 1% = VND 6 million, so the first payment is VND 22.67 million, which is 91 per cent of the VND 25 million profit. Total interest over 36 months is 600 × 1% × (36 + 1) ÷ 2 = VND 111 million, so the total repaid is VND 711 million. If profit slips to VND 18 million, the monthly gap is 22.67 − 18 = VND 4.67 million.

**Angel investor.** Suppose a pre-money valuation of VND 1,800 million. Adding 600 million makes the post-money valuation 2,400 million, so the investor holds 600 ÷ 2,400 = 25 per cent and the owner keeps 75 per cent. There is no repayment schedule. If a later round gives away another 20 per cent, the owner is left with 75% × (1 − 20%) = 60 per cent. If the workshop is worth VND 6,000 million in five years and no further round has taken place, the 25 per cent stake is worth 1,500 million, 2.5 times what the investor put in. The 36-month loan costs just VND 111 million of interest. Shares are cheap if the workshop fails and dear if it succeeds. The loan is the reverse.

**Reward crowdfunding.** Suppose cartons are pre-sold at VND 300,000 each and cost VND 180,000 to make and deliver, leaving VND 120,000 each. To keep VND 600 million after delivery you need 600 million ÷ 120,000 = 5,000 cartons, which is VND 1,500 million raised, of which VND 900 million goes on making and shipping. At today's sales pace, 5,000 cartons is more than 12 months of trading. The owner keeps 100 per cent and pays no interest, but needs an audience of that size and must deliver on time.

> **Figure:** (compare) The workshop and every figure are invented by the author for illustration, not real data.

```json
{
  "type": "compare",
  "columns": ["36-month loan", "Angel investor", "Reward crowdfunding"],
  "rows": [
    { "label": "You give up", "cells": ["VND 711 million repaid in total", "25 per cent of the shares", "5,000 cartons, costing VND 900 million"] },
    { "label": "Breaks at", "cells": ["A slow month with profit at VND 18 million", "Further dilution in later rounds", "Too few buyers"] }
  ]
}
```

This is my reading, not any source's conclusion. At VND 25 million of monthly profit, a VND 600 million loan is too tight. Borrowing only the VND 400 million for the machine gives a first payment of 400 ÷ 36 + 400 × 1% = VND 15.11 million, 60 per cent of profit, with the 200 million for ingredients found elsewhere, such as customer deposits. A 25 per cent stake fits only if the owner wants fast growth and accepts a co-decider. Reward crowdfunding does not fit without an audience near 5,000 cartons.

## Which five questions should you answer before knocking on any door?

This worksheet is my own tool, not a standard from any source. Use your real figures. Each "yes" still needs a step outside the table: check interest rates, tax and rules in Vietnam.

| Question | If "yes" | If "no" |
|---|---|---|
| Would the profit of last year's worst month cover the monthly repayment? | Debt is worth a look | Borrow less, or choose a source with no schedule |
| Do you have collateral and can you bear the risk of losing it? | A bank or a finance lease is worth a look | Poor odds with conventional debt |
| Will you accept a co-decider, and is the market big enough for that person to see an exit? | An angel or a fund is worth a look | Avoid equity |
| Do you have customers who would prepay, and can you deliver on time? | Pre-sales or rewards are worth a look | Avoid crowdfunding |
| For relatives' money: is it written down as a gift, a loan or shares, and what happens if it is lost? | Relatives' money is worth a look | Write it down before you take the money |

## Going deeper: where does the framework come from, and what has it not shown?

The library credits the sixth edition of *Entrepreneurship: successfully launching new ventures* by Barringer and Ireland, published by Pearson in 2018 (Barringer and Ireland, 2018). The publisher's page, which I read on 3 November 2026, gives a table of contents in which chapter 10 is titled "Getting Financing or Funding". I have not read that chapter, so the group and source names here come from the library, not from the book.

First limit: the framework is a catalogue, not a decision rule. The library holds no costs, success rates or conditions, so the comparison of the four groups is my reasoning.

Second limit: the groups overlap. Crowdfunding sits among the creative sources, yet its four types include equity and loans, which belong to two other groups (UK Crowdfunding Association, n.d.).

Third limit: the one funding theory in the library that speaks of an order is [pecking order theory](https://staging.khoi.co.uk/en/glossary#pecking-order-theory): firms prefer internal funds, then debt, and equity last, because information gaps make equity costly. I have only that definition line, not the original paper, so I do not use it to advise anyone. A venture with no track record or assets may be unable to borrow even if it wants to; that is my inference.

Fourth limit concerns the crowdfunding source. The UKCFA is an association whose members run platforms, and its page is a short introduction with no data on success rates or risks (UK Crowdfunding Association, n.d.). The library separates donation from reward, which the page groups together. The library also names a 2018 Edward Elgar textbook as a second source for the four types; its publisher page returned an HTTP 403 error when I opened it, so I do not rely on it.

## Frequently asked questions

### What counts as bootstrapping?

The library's entry describes it as avoiding outside capital through thrift, used equipment, customer prepayments and shared costs. The price is speed: you grow only as fast as the cash you hold. It suits a market that will wait for you and does not suit one where rivals are racing.

### What should family and friends who put in money get in writing?

At least four things: whether the money is a gift, a loan or shares; the repayment date if it is a loan; the percentage if it is shares; and what happens if the business closes. That is my suggestion, so that both sides understand the same deal. For a valid form of document in Vietnam, ask a lawyer.

### How does peer-to-peer lending differ from crowdfunding?

According to the UKCFA, peer-to-peer lending is one form of crowdfunding, called debt crowdfunding: backers get their money back with interest, without a bank in between. What differs across the forms is what backers receive. The other three pay in shares, a reward or nothing. For the borrower, this form is still a debt.

### Which source of finance is cheapest for a new venture?

The library holds no cost data, so there is no general answer. Cheap or dear depends on whether the venture succeeds: shares are cheap if it fails and dear if it succeeds, while debt is the reverse. Run both cases with your own figures, as in the hypothetical example.

## References

- Barringer, B.R. and Ireland, R.D. (2018) *Entrepreneurship: successfully launching new ventures (6th edn)*. Pearson. Available at: https://www.pearson.com/en-us/subject-catalog/p/entrepreneurship-successfully-launching-new-ventures/P200000005825/9780134731186.
- UK Crowdfunding Association (n.d.) *What is crowdfunding?* Available at: https://www.ukcfa.org.uk/what-is-crowdfunding/ (Accessed: 1 November 2026).

---

Canonical HTML version: https://staging.khoi.co.uk/en/blog/ban-do-nguon-von-khoi-nghiep