Entrepreneur’s Guide to Non-Dilutive Funding

You’ve built a business from the ground up, and now it’s time to scale—with larger inventory orders, new hires, or investments in marketing and technology. Meeting those demands raises a critical question: How do you obtain more capital without reducing your level of ownership or control?

Non-dilutive funding is a category of business financing that lets you preserve ownership of your business. Learn about different types of non-dilutive funding so you can choose the best option for your goals, growth stage, and business model.

What is non-dilutive funding?

Non-dilutive funding refers to capital raised without selling a financial stake in your business. While non-dilutive capital doesn’t involve equity, these funding options may still come with financial or operational constraints. For example, loans often involve collateral, while grants typically come with strict reporting requirements.

Non-dilutive funding often works best for businesses that have moved beyond their initial growth phase and want to scale, though some options—such as grants—can support very early-stage companies. Other types of non-dilutive funding, including venture debt, are designed for startups that have already raised equity financing and want to give themselves more time to reach key growth or revenue milestones between dilutive funding rounds.

Non-dilutive vs. dilutive funding

The key difference between non-dilutive and dilutive funding is how each affects ownership. Unlike non-dilutive financing, dilutive funding involves selling shares of your business to venture capital firms or angel investors in exchange for capital. This form of equity financing often requires giving investors board seats or granting outsiders other forms of influence over strategic business decisions. 

Types of non-dilutive funding

• Traditional debt
• Revenue-based financing
• Venture debt
• Crowdfunding
• Grants
• Tax credits

Non-dilutive funding is a group of financing options that vary widely in structure, eligibility, and repayment terms. Some options provide flexible repayments tied to revenue, while others require fixed monthly payments or involve no repayment at all. Faster, easier options typically cost more, while cheaper financing usually requires stronger financials and longer approval times.

All of the following options can help you grow your business without altering long-term ownership:

Traditional debt

Traditional debt is one of the most common forms of non-dilutive financing. Many businesses use loans or lines of credit to raise capital without sacrificing equity. In fact, a US Federal Reserve survey found that 43% of small businesses applied for a loan, line of credit, or cash advance in 2024. 

• How it works. You receive upfront capital and repay it over a set period with interest, typically through fixed monthly payments. 

• Providers. Financial institutions such as banks and credit unions, as well as alternative lenders and digital banking platforms. 

• Best for. Established businesses with consistent revenue and the steady cash flow to make fixed monthly payments.

• Key considerations. Lenders usually require a solid business plan and financial documentation. Traditional bank loans may also require that you pledge collateral (business or personal assets), which the lender can seize if you don’t repay the loan. 

• Regulatory oversight. In the US, traditional lenders operate within established federal and state frameworks designed to protect borrowers and ensure responsible lending practices. 

For many founders, traditional debt is one of the earliest ways to access capital without giving up equity. Gaby Bayona, founder of bridal brand Truvelle, for example, bootstrapped her business and used a small bank loan to get started. That early use of debt helped her fund initial operations while maintaining full ownership of the business.

“I got a $15,000 loan,” she says on the Shopify Masters podcast. “And I reinvested everything. I didn't take a salary for very many years because everything went back into the business.”

Revenue-based financing

Revenue-based financing and similar products, such as merchant cash advances, provide capital in exchange for a percentage of your business’s daily, weekly, or monthly revenue, often by taking a cut of your credit or debit card sales. It’s an increasingly popular non-dilutive funding option for growth companies, with the global market expected to reach $42.3 billion by 2027, according to Grand View Research. 

• How it works. You receive upfront capital and pay a fixed percentage of your daily, weekly, or monthly revenue until a predetermined amount is reached. This cap sets the maximum total amount you will repay over the life of the financing. Unlike traditional loans, your payments depend on business performance.

• Providers. Fintech companies and platform-based lenders that offer embedded, revenue-based financing.

• Best for. Growth companies with predictable or seasonal revenue patterns, including many ecommerce, SaaS, and subscription-based businesses. 

• Key considerations. Since pricing is based on a fixed total repayment amount—often expressed as a cap or multiple of the original advance—rather than a traditional interest rate, it’s important to compare the total dollars you’ll repay and how quickly payments will be deducted from revenue when evaluating cost.

• Regulatory oversight. Some US states, including California and New York, require providers to disclose estimated annual percentage rates (APRs) or APR-equivalents, which reflect the total cost of financing, including interest and fees. This is meant to help businesses compare rates across alternative financing options. Even without an interest rate, APR is calculated by spreading the total cost of the financing over a year. Because revenue-based advances are often repaid quickly, that annualized rate can look high.

Eligible Shopify store owners may want to consider Shopify Capital, a built-in funding program that offers one-time loans and flexible lines of credit to eligible Shopify store owners. Repayment happens automatically using a fixed percentage of your daily sales, so payments rise and fall with your business performance. There’s no traditional interest rate; instead, you repay the total amount owed through these daily revenue deductions until the advance (plus fees) is fully satisfied.

Venture debt

Venture debt is a form of non-dilutive financing for private companies that have already raised capital from venture capital firms. It’s commonly used by tech companies and other venture-backed businesses to bridge equity funding rounds, often providing additional time to reach product or revenue milestones that can increase company valuation.

• How it works. Venture debt lenders offer term loans or lines of credit that are repaid over a set period. Lenders underwrite these loans based on your projected growth and ability to raise future equity.

• Providers. Specialized banks and funds that lend to venture-backed companies.

• Best for. Tech companies and other startups that have already raised capital through equity financing rounds and need additional financial support. Venture debt is particularly useful when you’re close to hitting metrics that will boost your business’s valuation.

• Key considerations. Venture debt deals typically include warrants, which give lenders the option to purchase equity later, such as during an acquisition or initial public offering (IPO). If exercised, these warrants introduce some dilution, but typically represent a much smaller ownership percentage than a full equity round. 

• Regulatory oversight. In the US, venture debt transactions are governed by established commercial lending frameworks, including the Uniform Commercial Code, which standardizes rules around secured lending, collateral, and creditor rights. 

Crowdfunding

Crowdfunding raises capital from a large number of supporters through online platforms. While crowdfunding can involve selling equity, many campaigns are non-dilutive.

• How it works. You create a campaign on a crowdfunding platform, set your funding goal, and share your campaign with potential backers. Supporters contribute funds as donations or in exchange for early access to products, exclusive merchandise, or other non-equity rewards. 

• Providers. Crowdfunding platforms include Kickstarter, Indiegogo, and others. Each platform has its own fee structure, funding model, and audience focus.

• Best for. Businesses that can offer tangible rewards, have a compelling story, or are looking to validate demand for their product before committing to full-scale production. 

• Key considerations. Running a successful crowdfunding campaign requires significant upfront work, including building a marketing plan, creating content, engaging with your backers, and fulfilling rewards. Platforms typically charge fees totaling 8% to 9% of funds raised, including payment processing.

• Regulatory oversight. In the US, businesses are legally required under consumer protection laws to deliver promised rewards to backers. 

Photography and travel accessories brand Peak Design has raised more than $60 million through multiple Kickstarter campaigns since 2011 and has remained fully founder-owned. Founder Peter Dering has described crowdfunding as a deliberate cash-flow and pricing trade-off.

“In exchange for getting the money upfront, you’re giving your backers a significant discount at the beginning of a product life cycle,” Peter says on an episode of Shopify Masters. “We’re bringing revenue forward and creating momentum, but there’s a give and take.” 

Grants

Grants provide non-dilutive funding through awards that don’t require repayment.

• How it works. Public and private organizations award funds to support business innovation and small business growth, including through grant programs and pitch competitions that offer equity-free awards. Unlike loans, grants don’t need to be repaid and don’t affect your ownership stake, making them a fully non-dilutive source of capital.

• Providers. Grants are offered by a range of organizations. In the US, government grants are issued by agencies such as the National Institutes of Health (NIH) and the National Science Foundation (NSF), along with other federal and state programs. Additional funding is available through initiatives like the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. Private foundations, nonprofits, and corporations also provide grants.

• Best for. Small businesses that meet specific criteria, including those working on innovation or sustainability, businesses owned by entrepreneurs from underrepresented groups (such as women, veterans, and racial or ethnic minorities), or companies facing specific financial challenges. 

• Key considerations. Grant applications can be competitive and time-intensive. Businesses that receive grant funding should be prepared for ongoing recordkeeping and detailed reporting requirements.

• Regulatory oversight. Government grants are overseen by the national, state, or local agencies that manage them. Private grants follow the guidelines set by the organizations that issue the awards.

Dorian Morris, founder and CEO of inclusive skin care brand Undefined Beauty, shared on an episode of the Shopify Masters podcast how grants have supported her business: “I've had the amazing opportunity to get grants from pitch competitions, including one sponsored by the New Voices Foundation and Shea Moisture that I won. It was $100,000 in equity-free funding.”

Tax credits

Tax credits provide non-dilutive capital by reducing how much your business owes in taxes. 

• How it works. Unlike deductions, which lower your taxable income, tax credits directly reduce your tax bill. This can leave your business with more cash to reinvest in areas such as product development, hiring, or operational improvements.

• Providers. Local, state, and national tax authorities. 

• Best for. Businesses in early growth stages that qualify for specific credits, such as those related to research and development, manufacturing processes, or hiring and workforce expansion. 

• Key considerations. To claim tax credits, your business must document eligible business expenses and demonstrate that they meet each credit’s legal requirements. Working with a tax specialist experienced in these programs can help ensure compliance and maximize the benefit.

• Regulatory oversight. The national, state, and local agencies that issue them govern the credits. In the US, the IRS oversees and audits federal credits.

*All loans through Shopify Capital Loans are issued by WebBank. Offers are subject to change based on several factors including your store's performance and the review of your financial information. Shopify Capital Loans must be paid in full within 18 months, and two minimum payments apply within the first two six-month periods. Offers to apply do not guarantee funding. Repayments are made based on a percentage of daily sales.