Funding Options For Growth

Growing your company takes a strategic plan and a growth budget. Funding your growth, businesses is one of the key obstacles to getting your company off to the next level.

There are four primary reasons for seeking funding:

1) Expand market share

2) Purchasing inventory

3) Hiring better people

4) Strengthening business processes

What approach to funding will best suit the intent and needs of your small business? Understanding what types of financing is available is a good first step in figuring that out.

There are two major categories of financing—debt and equity—and other options exist as well.

Debt Financing

This involves borrowing money that you must repay (usually with interest) over a period of time. Generally, some or all assets of your business will be used to secure the loans. To protect them from default on a loan, lenders commonly require borrowers to personally guarantee repayment (i.e., to have a sufficient personal interest at stake).

Banks have been the major source of small business debt financing, but some have become more reluctant to offer long-term loans to smaller companies because of the risk involved. I have found the best place for funding is our customers. Our best customers want to see us succeed, they want us to be strong and develop new products and ideas for their business. If you grow...they will grow! Venders are another place to get funding for growth, for the same reason - if you grow...they will grow. You will be surprised if you share your growth plans with your key customers and key vendors. They will provide resources to help you grow.

Equity Financing

With equity financing (or equity capital), a small business raises money by offering shares of ownership in the business. Investors’ equity investments give them ownership stakes in the business and allow them to share in the company’s proﬁts. This is risky and you give up some of your business to someone else. They may be silent or very noisy in your business.

Equity capital may come from a variety of sources—such as your own personal savings, your life insurance policy, family, friends, employees, customers, government grants, venture capitalists, or angel investors.

Other Funding Options

These other financing and cost-sharing options also exist.

Partnerships

Joint ventures

Alliances

Crowdfunding

You may want to consider joining a CEO Leadership group to brainstorm how other small businesses owners have grown to the next level. Scaling is planned next step of your business that utilizes all aspects of funding. How to SCALE doesn’t just happen by accident - you have to scale and make money. Knowing what to scale is the first step in how and when to scale.

Categories: : Funding