As the owner of an up and coming business, you know the importance of steady cash flow. You not only need money to pay your employees and to keep your inventory well stocked, cash is also a must in order to keep up with your growing company. If your company has experienced quick growth, congratulations! But, now you’re stuck with the issue of finding the money to keep your business booming. Keep reading to learn about 5 options to fund your business’ growth.
With the introduction of sites like Kickstarter, crowdfunding has become increasingly popular, especially among startup companies. There are two types of crowdfunding, reward and equity. Reward crowdfunding involves the exchange of a reward for money. Equity crowdfunding involves giving a percentage of your company to investors.
Both types of crowdfunding options have their perks. With reward crowdfunding you have the potential to reach hundreds of new potential customers. Equity crowdfunding is attractive because it allows business owners to gain the support of an investor. Partnering with investors can open new networking opportunities that can further expand your company.
The time and effort needed to successfully crowdfund is well worth it. The Pebble E-Paper Watch raised more than $10,000 in less than 40 days. Ouya, an open-source game console raised more than $8.5 million in just 29 days! The potential (and money!) is there, so go for it.
If you go the crowdfunding route, adding presales to the mix may be useful. By offering sample products or sneak previews of your service to your investors, you can put revenue in your pocket before the full blown product release. You can also offer a limited number of pre-sale orders to your customer base if you’re not working with any lenders. This revenue can help you get through the production phase and prepare you for a wave of incoming orders.
Short Term Business Loan
When you think of a business loan, you probably think of a loan that lasts between 5 and 10 years. While long term loans have their purpose, to fund your company’s growth, your best bet is to go with a short term loan. A short term business loan offers less total fees, business loan rates, and other expenses when compared to longer loans. But, before applying for a short term loan, you’ll want to be well aware of how much money you need as well as how quickly you can pay it back.
This type of loan is best for start-up costs, equipment purchases, as well as for the purchase of quick-turnaround inventory. You wouldn’t want to use a short term loan to purchase real estate or to buy new company vehicles.
There are all sorts of government programs at the federal, state, and local levels that are available to provide funding for expanding businesses. One of the largest federal funding sources for small businesses is the Small Business Administration (SBA). The SBA offers a variety of loans but there are also lenders that administer the loans as well.
To fund your businesses’ growth, your best SBA loan option is the 7(a) loan. This loan:
- Provides funds for expansion, working capital, and equipment purchases
- Is federally guaranteed up to $5 million
- Can be obtained through banks, credit unions, and other lenders
One of the biggest benefits of an SBA loan is that the loan is guaranteed by the federal government. If a traditional lender has turned you down, the next best step is to work with the SBA. These programs exist to help small businesses to maintain their growth and to find success in their industry.
Business and personal credit cards can be used to fund your business’ growth. One of the top benefits of credit cards is that they’re much easier to obtain when compared to a traditional business loan. Since you’re looking to secure financing for your business, it’s best to try to obtain a business credit card first. When applying for a business credit card, you’ll likely need to apply based on your personal credit versus your business’ credit. But, you can combine some items such as business revenue and personal income.
If you’re unable to secure a business credit card, a personal credit card is the next best option. But, be leery of intermingling personal and business spending. If you apply for a personal credit card for business purposes, use it for that reason only. Otherwise you risk a financial and tax headache.
Experiencing growth as a startup company is exciting. Growth shows that you’ve found your target audience and that your service is in demand. Be sure you’re able to keep up with your business’ success with these 5 funding options to keep your company roaring.
Are you a business owner? What are your top tips to fund business growth? Leave us a comment in the section below. Your input could potentially help a small business owner get on the path to financial success.