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Ways to Finance Your Business Growth

Companies / Debt & Loans May 14, 2021 - 12:16 PM GMT

By: Steve_Barker

Companies

Do you have a small startup business that you put in a lot of hard work and sweat into and you’re looking to take it to the next level? Many small businesses with great products or services and a comprehensive long-term business plan are not able to grow due to financial obstacles. Making more money requires putting some into improving processes or expansion which is something most small business owners don’t have the ability to achieve.

However, that doesn’t mean you should settle and not seek growth. There are several ways that you can turn towards to finance your business growth and ultimately implement your business plan.


Venture Capitalists

The term ‘venture capitalist’ refers to individuals or companies who invest in various business ventures by offering capital or funding for expansion. These funds are usually given to businesses with promising long-term growth since venture capitalists are usually looking to get a higher rate of return than traditional investments. These investments can come from either progressive investors as well as any financial institution like investment banks. You don’t only get funding from this way of financing, you also receive technical or managerial expertise and industry connections.

Angel Investors

Angel investors are another way you can finance business growth and it refers to affluent individuals who offer capital to companies in exchange for convertible debt. The aim of this exchange is for investors to turn the debt into equity after a period of time. The difference between angel investors and venture capitalists is that the latter is usually a large established company that invests in businesses by trading equity for capital, while angel investors are individuals that invest in businesses even without promising demonstrable growth to get short-term returns or medium-term sales value. If you choose this way, it’s best to have an exit plan unless you plan to grow your business only to sell it and acquire more.

Bank Loans

You may already have thought of applying through banks the first time you considered getting your business financed and with deeper research, you’ll find that bank loans are the most popular. Some may even say it’s the best way to get a loan but you’ll only know if that applies to your business, while you’re trying to get matched with small business loan options, once you thoroughly compare all the choices. To get the necessary funding to grow your business, banks offer medium or long-term finance where a specific period of time is set for the loan along with the interest rate, repayment amount, and timing.
Since banks rely on cash flow generated by the business as a form of repayment, they only give loans to companies with a proven record of generating cash and solid assets. They will also probably require providing some kind of collateral as security for the loan but it can sometimes boil down to only personal guarantees given by the business owner.

SBA Loans

SBA loans refer to the various loan programs offered by the Small Business Association in the United States. These programs are accessible to anyone, are less risky, and are specially designed for small businesses. The actual lending does not come from the association itself but through a credit union, loan officers in local banks, or nonprofit financial intermediaries. The SBA also has a very efficient Microloan Program that gives small business loans reaching up to $50,000 through intermediaries who also provide management assistance to increase chances of success.

Crowdfunding

If you’re looking to get funding without having to repay it later, crowdfunding is your best option. It refers to asking a group of people to donate a certain amount of money for a project or cause and all you need to offer in return are certain rewards. Crowdfunding allows businesses to receive small investments from several sources instead of looking for one large source. It falls under three categories which are donation, debt, and equity. There are various platforms dedicated to crowdfunding businesses such as Kickstarter and Indiegogo.

Bootstrapping

Wondering what it means to finance business growth through bootstrapping? Well, it means using your own money from savings, personal loans, credit lines, or credit cards. It’s the easiest way there is and you won’t have to give up any ownership or equity in your company as opposed to choosing venture capitalists or angel investors. Just like with using other ways of financing, you’ll need to make sure you produce business revenue as soon as possible so you pay back any personal loans or credit card debt or return the money borrowed from your savings.

Partner Financing

Adding another player to the game can never hurt, that’s why partner financing can be beneficial for more than one party when done right. The concept consists of partnering with another company that provides you with the necessary funds needed for growth in exchange for special access or your product or service. They would also have access to distribution rights, ultimate sale, and staff.

Partnerships are usually made with similar businesses to yours or ones with an interest in your industry which can benefit you in getting marketing programming, relevant customers, and salespeople as well as valuable industry connections.

Government Grants

Businesses specialized in certain industries can be eligible to receive government grants that aim to support them in their growth. They are one of the least-risk options since you will most likely not be required to pay back any of the money you receive. However, recipients have to meet certain federal research and development goals and need to possess a high potential for commercialization. That’s why the process of applying for a business grant can take time and include restrictions on how you can use the money.

These are almost all the ways out there that support you financially while you are growing your business. Each business is different so one or two of these could work for you while the others might not. To avoid the risk of making the wrong choice, make sure you thoroughly study the financial and technical state of your business and maybe ask for professional advice. It might seem like a lot of work and a big decision to make, but it’ll be worth it once you achieve both your short-term and long-term business goals.

By Steve Barker

© 2021 Copyright Steve Barker - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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