In the beginning, most new business owners are looking for ways to get clients to buy, improve their company, and make enough to remain afloat. However, as a business grows, business owners have to start thinking about taking their businesses to the next level. This is done by using additional funds to cover the expenses required to accelerate growth. Getting additional funding is always challenging due to the many roadblocks that block access to traditional sources of funding. In this article, we will explore some of the best ways to fund business growth.
Bootstrapping
Bootstrapping has traditionally been one of the best ways to fund business growth. It’s where a business owner invests in their own business by putting up their own funds. While bootstrapping can allow a business to get an injection of cash quickly, it can lead to complications where the business owner is confused about doing what is best for the business and what is best for a return on investment.
The main advantage of bootstrapping is that there are no third parties involved, and the business owner is only indebted to themselves. This means there are no loans to service and there is no equity or ownership given up to get access to the funds the business needs.
Bootstrapping also works really well where the business owner has other areas to focus on, so they do not have to provide any input into the running or operations of the business they have bootstrapped.
Business loans
For business owners who do not have the funds to bootstrap their businesses, bank loans are a great option. Bank loans are popular because the business owner does not have to give up any ownership or equity to secure a loan. The only thing they have to prove is that the business is financially sound.
Getting a business loan is not always easy because, in addition to the business plan required by many lenders, businesses have to also meet other requirements and eligibility criteria. Even where they do, they might still have to wait for a long time for their loan to be processed, approved and disbursed.
Business loans also come with a risk. In case the business is not able to repay the loan, a lender might compel the business owner to liquidate it to come up with the funds to repay the loan. Where the business owner decided to provide a personal guarantee for the loan, they will be responsible for its repayment should the business not be able to pay back the loan.
Small business loans or Financing plans
This is a different type of loan that is backed by the government. For these types of loans, the government takes over some risk so that small business owners are more confident applying for them. These loans are great for small businesses that have a revenue of $10 million or less. The amount loaned can be high enough to finance different aspects of the business including the purchase and leasing of equipment, expansion, hiring and more.
One of the best ways to get a small business loan is to talk to a bank to get in touch with your local small business loan office and see the options available to you.
Personal loans
This is very similar to bootstrapping because you will be taking the loan in a personal capacity. If you have an asset to secure the loan with, you may get a higher amount at a lower interest rate.
Personal loans are best suited in cases where you need fast cash injection and do not have time to go through the lengthier bank loan or small business loan application and approval process.
Credit card debt can also be considered a personal loan that you can use to fund your business, just ensure you make your payments on time to avoid penalties and late fees.
Consider Cryptocurrency
Cryptocurrency is changing the world, and one of the ways it is doing so is through transforming how start-ups fund their growth. The trend to accept cryptocurrencies such as bitcoin has taken off, with a lot of businesses accepting bitcoin due to the tremendous potential it holds. There are a lot of platforms that have come up to try to help businesses not only raise funds using bitcoin and other cryptocurrencies, but also accept donations through these forms of currency.
Businesses that already own bitcoin can also consider investing in it for its high returns. This can be done in various ways, including through direct trades for profit. Another way is to invest in products similar to Bitcoin ETFs. The way ETFs (Exchange Traded Funds) work is that they track the price of an asset, paying out against the price of that asset. The main challenge with bitcoin ETFs is that they have been restricted due to certain legislation and the unregulated nature of bitcoin.
Although it is not possible to invest in bitcoin ETFs for now, it is possible to invest in other vehicles that resemble these ETFs. One of these vehicles is bitcoin funds. These funds allow you to put money in a pool that invests in Bitcoin. These funds do not hold any bitcoin directly but only act as a vehicle for investing in bitcoin.
For more information, read this Wealthsimple bitcoin ETF explanation of how these funds work and why it is still lucrative to invest in companies that have closed-end bitcoin funds. Wealthsimple provides a financial tool, Wealthsimple Crypto, for businesses and individuals who want to invest in crypto directly. Their other financial tools help you invest on autopilot, invest in stocks, or send cash quickly. Wealthsimple also has a team of financial advisors standing by to help you make the most of your money, whether you are looking to invest in crypto or other investment options.
Friends and family
Getting additional funding from friends and family is often considered a form of bootstrapping when you do not have to give up anything for the loan. In some cases, you might have to give up some equity or ownership stake to get the loan.
One of the reasons why getting funding from friends and family is because of the emotions and entanglements involved. To ensure there are no complications, all parties should treat the loan as a loan to and from a third party that they do not have any familial or friendly relationship with.
To assure friends and family members that your business is a good investment, always provide business and growth plans, Also, sit down with all lenders so you can discuss repayment options and steps to be taken should anything unforeseen happen. This helps eliminate any disputes if anything should prevent the loan from being repaid.
Angel Investors
If you have never had an angel investor, you may confuse them with venture capitalists. Angel investors are usually people, businesses or groups of people who provide capital for promising businesses. They usually want convertible debt – one that can be converted to equity, or ownership equity for the loan. Angel investors take a lot of risks investing in smaller, riskier businesses, so they may ask for up to 25% of the company to invest.
Because angel investors invest in businesses to realise a return on their investments, they usually require that you have an exit strategy. Such a strategy can be to sell the business after substantial growth, go to an IPO, or even grow big. If you plan on keeping the business for a long time or forever, angel investors might not be right for you.
Venture Capitalists
Venture capitalists provide funds to businesses for growth or expansion. Venture capitalists are usually looking for a higher return on investment than they would get with other investments. This means that if your business is not in a high-growth segment, they may not consider investing. If they deem your business viable and a great investment, they can invest up to $10 million.
Crowdfunding
Crowdfunding is where businesses ask people to send a small amount of money in exchange for something. These funds are usually not considered investments, but rather payments for goods or services that will be received at a later date.
Crowdfunding is an excellent option for businesses that want to improve or grow specific parts of their business. Additionally, businesses should be developing something new or exciting enough so that people feel compelled to send them money.
Note that while there are different ways of crowdfunding, most businesses now use online platforms to do so. These platforms can differ and have different requirements. A common requirement is that the funds received must be more than a set goal amount of the funds to be released.
Whatever the funding source you use to fund your business growth, you need to ensure that the money is enough and that you are not giving up too much to fund your business. Also, ensure that any funding sources are used for their intended purpose, as this gives you the best chance of realising a high return on investment, which makes it easier to recover any amount invested.
