Are you planning to grow your business?

You might already have a business plan, additional products and/or services you want to offer, and the buyer personas you want to create so that you can reach your target audience. All these are important; however, you’ll need to fund your business so that it can grow the way you want. You have several options when it comes to funding your business.

These are some of the options you can consider to get funding.

Self-Funding

It’s possible to use your own money to fund your company’s expansion and growth plans. This approach carries plenty of risks because you might lose more money than you can make. If your plans fail and you miss your targets, you might fall into a weak financial position that limits your flexibility moving forward. However, using your own cash shows your savvy and ability to maximize limited resources. This improves your chances of getting a loan from traditional lenders such as banks, investors, and/or a government grant. Monitor the factors that affect your budget and determine ways to maintain your cash flow when using your own money.

Traditional Lenders

One of the ways to fund your business is to get a traditional loan from a bank. The latter can provide you with the amount you need to achieve the growth goals you established. However, they follow strict criteria you need to meet before they consider your application. They review your credit score and history before they determine if you have the financial capacity to pay the loan and its interest on time. You’ll have a difficult time securing a loan from a bank if your credit score and history is below their minimum. If your business has been in your niche for years and is generating more than enough annual revenue, your chances of getting a bank loan with good interest rates are higher.

Microlenders

Another option to consider for funding your business is microlenders. The latter are small lenders that offer microloans, usually less than US$50,000. Your company might need just that amount or lower. You can consider a microloan if you think your business doesn’t need to borrow from a bank to finance a project, launch a new product, or enter a new market.

Invoice Factoring

A factoring company can purchase your outstanding invoices from you. They repay you a percentage of an invoice’s worth, typically from 75% to 90%. After full payment of the invoice, a factoring company repays the balance after deducting their factoring fee and charge. The concept isn’t like a loan where a lender factors your credit score in their assessment. The credit scores of your customers are the ones they need to assess because they need to know if they can pay their invoices on time.

Government Grants

You can approach your local government to determine if you can get a grant to grow your business. Depending on your business type, industry, and situation, they can fund your business. You need to submit the appropriate paperwork and requirements to get a grant.

Crowdsourcing

It’s also possible to crowdsource the funds you need to achieve your business goals. You’ll have to post your ideas and plan online through different platforms. You’ll get pledges of varying amounts from multiple sources. Crowdsourcing has its advantages and disadvantages such as if your donors like your idea and believe that you have a solid business plan, they can donate as much as they want. One of its disadvantages is that you must make a strong pitch and make a good impression on possible donors to convince them.

Borrow from Loved Ones

You can approach your family members and friends when looking for funding. Seek their help in a professional manner and provide them with incentives such as a percentage of sales or part ownership in your company. Offer a win-win situation when you ask them for financial assistance. Put all your agreements in writing and have all parties involved sign the document.

Find Investors

Seek out potential investors that might want part ownership of your growing business. Find them in your local business groups or online platforms. Send a detailed proposal and business plan that includes feasibility studies, products you want to sell, budget for sales and marketing campaigns, and other materials you think will convince them to fund your business.

Identify Online Creditors

Your credit score and history are important factors that may determine if a lender approves or denies your loan application. Online creditors don’t have the same stringent criteria when screening loan applications. Send your application to an online creditor that has good reviews. Assess their requirements and your financial capacity to repay the loan.

The abovementioned creditors are some of the options you have to get the funds you need for the growth of your business. You don’t have to rely on one creditor. You can combine the funds you can get to reach your desired amount.

How to Make Your Business Attractive to Lenders

Once you identify a potential lender, you must make a convincing pitch to them, so they provide you with the amount you need. These are some of the things you can do to make your business attractive to lenders.

1. Create a detailed business plan that showcases the strengths of your company. Highlight the features of a product you want to launch, the insights you have into a potential new market, the challenges you might encounter, and the profitability of your idea.
2. Provide financial reports that show you’ll be able to maximize your resources, manage a budget, generate profits, and determine the timeline for a return on investment.
3. Show that your business has the financial capacity to pay for the loan you acquired within their due dates.
4. Create a story behind the idea you want to pursue. Sometimes potential investors want to know more about the vision and narrative you tell them beyond the hard numbers you show.
5. Outline the investment structure and how a potential lender can benefit from your idea. Include the potential risks they might experience investing in your idea.

If you need assistance with updating your accounting books before making your pitch, we at Robookkeeper can assist you. We offer first-rate outsourced bookkeeping services.