If your small business is ready to grow and succeed, it can be a new journey to overcome the market competition. But your company growth will be impaired if you don’t have a good cash flow to manage your investments efficiently. This is why you need to know how to raise money for your business.
You’ll require enough funds to sustain your business growth. And the best way to fund your operations could be to utilize the retained earnings you’ve created over the years or months. But if that isn’t available, you can always consider other options.
Working with angel capitalists and other investors can be a great way to finance your company’s growth. However, this may require you to forgo some business ownership from outsiders. If you want to remain with 100% business ownership, you can go for non-dilutive startup funding. This type of funding doesn’t require you to surrender any equity in exchange for finances. In other words, you’ll maintain full control of your business.
That said, you can consider various ways to raise money and keep control of your company’s growth. They include the following.
Apply for Business Loans
One of the first ways how to raise money for a business is by a business loan. A very common non-dilutive business funding options is to apply for loans. This is a practice of borrowing money from financial institutions and repaying later. Although the loan terms vary from one lender to another, you must refund the money plus the interest within the stipulated period.
There are various types of business loans. One of them is a secured loan. When getting this loan, you must provide security or collateral for the money. And when you default in repaying the loan, the lender has a right to repossess the asset you used to secure the loan.
Another one is an unsecured loan. Unlike a secured loan, unsecured loans don’t require you to provide any security, but it attracts high-interest rate. Your credit score must be high to qualify for this type of loan. Nevertheless, it can be a great option to fund your business growth. Other business loans include lines of credit, bank overdrafts, and equipment loans. Evaluate your need and apply for the right business loan.
Find Government Grants
Government grants are other common sources of non-dilutive funding for startups. It refers to financial aid awarded by the government to businesses. And for a good reason, government grants are non-refundable. It’s, therefore, one of the most cost-effective ways to finance business growth and maximize its profitability. Asking yourself how to raise money for business growth? Well, government grants are a great option.
Because of the non-refundable nature of grants, it’s one of the most competitive sources of business finance. Therefore, you’ll barely qualify for it unless you strictly adhere to all the guidelines outlined by the providing agency.
For instance, your business or the project you want to undertake should address the concerns of the larger population in society. And this could be one of the reasons why most of the firms that qualify for government grants are charitable institutions. But there are still other grants designed to boot small businesses. You need to know the organization you represent and read the grant’s eligibility requirements before applying. This will help streamline the process and increase your chances of qualifying for the grant.
Work With Angel Investors
Working with angel investors can be another great non-dilutive way to raise money for business growth. These wealthy individuals invest their money in startups and small businesses with high growth potential.
Apart from providing financial support, angel investors can also provide mentorship and the skills you require to run a successful business. Another benefit of seeking angel investors is that you won’t have to repay the money if your business fails to take off the ground. Therefore, it can be a good deal, especially when compared with debt financing or taking loans.
Find Love Money
If you are wondering how to raise money for business growth purposes, you may want to consider love money. Love money is another non-dilutive funding option you can consider to keep control of your startup’s growth. This involves finding financial aid for your business from friends and relatives. Finding love money is one of the most flexible ways to source business finances. It allows you to negotiate for better repayment plans with the people giving you the money. And in some instances, your friends or relatives might not require you to refund the money. They’re only interested in seeing your business succeed.
Consider Invoice Factoring
Today, most businesses sell products and services on credit. Although this can be a good way to attract and keep customers, it can hurt a company’s cashflows. This is true, especially if you allow customers an extended credit period. Fortunately, you can turn to invoice factoring and enhance your cash flow strategy. This can be a great way to raise money.
Invoice factoring requires you to partner with a third-party firm. This firm is known as an invoice factoring company or provider. They’ll buy off your accounts receivables at a discount to clear all your customers’ debts. This will ensure you’ve got enough funds to run your daily operations.
Apart from being a non-dilutive funding option, invoice factoring has several other benefits. For instance, it ensures employees aren’t wasting time finding debtors and collecting debts. Therefore, every team member will centralize their focus on other important matters, which will eventually promote your company’s overall productivity and growth.
Lastly, you can consider crowdfunding to finance your business projects. This is peer-to-peer lending, which happens through online platforms. People will consider funding your business based on the story you narrate about your products or services. For that reason, ensure you understand your target audience before you start your journey.
You also need to note that the crowdfunding platform will take a percentage of the total raised funds as a service fee. But still, this option can be a great way to ensure you retain your business equity. Make sure you raise funds through a secure crowdfunding website.
How to Raise Money to Promote Business Growth – Summary
Startups face a lot of challenges while trying to cope with market competition. One of them is the lack of enough funds. You can’t efficiently run your business if you don’t have enough funds. One of the best ways to finance the growth of your business is to turn to non-dilutive options. This enables you to retain 100% ownership of your business. You can also consider the methods mentioned in this article to raise money and keep control of your business growth.