As your business grows, you will come into many opportunities to help continue your business’ growth trajectory. Unfortunately, these opportunities will often take lots of time and, more importantly, money for you to take advantage of them.
It is not always easy to come up with funding to support your business’ growing ambitions.
There are many ways to grow your business. These funding ideas can help your business to grow and succeed.
Personal funds are often a significant source for new businesses. However, getting a bank loan or finding investors can be challenging in the early stages without a lot of business history.
Whether it’s personal savings, assets, or other personal bank loans, early-stage entrepreneurs often have to utilize what they have to start their business.
Using personal funds can show potential lenders and investors that the owner has “skin in the game.” In addition, a personal investment from the owner can help inspire confidence in potential investors and lenders to support your business growth.
Professional networks and even personal networks such as friends and family can be a source of funding, primarily if they have already expressed support for the business venture.
Navigating personal and professional relationships can be tricky. Be sure to discuss and then document the terms of any investments or loans, especially for family and friends. Seeking professional advice can be helpful if you go down this route.
Bank loans or lines of credit are popular ways to fund a business. However, banks often have different products for business owners at various stages of growth.
Shop around different banks as they may have other offerings that fit your business.
Financial institutions conduct a lot of due diligence, and it can be challenging to qualify for loans if the business has not been around for too long.
Typically, bank loans require a wide array of documentation such as:
- Business plan
- Credit rating
- Collateral to guarantee repayment
Banks may also look favourably at other types of considerations, such as personal investment or the business history of the owner. Be sure to present as much information as possible to help make a case for your business.
Angel Investors and Venture Capital investors are two types of professional investors that invest in growing businesses.
Angel investors are usually high-net-worth individuals looking for investment opportunities. They may look for new opportunities in industries that they have a personal interest in and typically offer smaller investments than venture capitalists.
Venture capitalists are professional firms that invest large sums of money. The firms typically also offer professional services to help optimize and grow businesses.
Investors can help you fund your business in exchange for a part of the business.
They can also be key strategic partners. They have a vested interest in your business’ growth, after all!
Evaluate potential investors for the experience and resources they can offer your business. Build relationships with potential investors who have business goals and values that align with your vision.
Government loans and grants often cater to specific purposes or industries.
Grants are usually tricky and often have precise criteria that the business or business owner must satisfy.
However, many grants do not need to be repaid or have lenient repayment terms compared to bank loans. This can be useful if a business is in the growth stage, and you do not need to worry about loan payments, or if you do not want to give up a part of the equity in exchange for funding.
It is often easier to find grants if you have a specific use for the money. The Government of Canada maintains a list of business benefits and grants that can be helpful in your search.
Supplier financing can be a lucrative way to create a more predictable and stable cash flow if you have a business that needs a lot of inventory or specialty equipment.
Ask larger suppliers if they offer payment plans so that you do not have to pay for equipment or inventory all at once to help you manage your cash flow.
Depending on your business model, customers may be paying invoices 30 or 60 days after you offer the service. If you need to pay your suppliers and employees, this can cause a bottleneck in your cash flow.
A small discount or incentive may help you collect payments quicker and ease the burden on your cash flow.
Most business financing falls under two broad categories: debt financing or equity financing.
Debt financing – such as loans and mortgages – come with regular payments, so you need to have the ability to generate cash to pay them. Equity financing does not have regular payments but requires selling part of a business.
The type of funding mechanism you choose should reflect your long-term business goals and visions.
If you are looking for funds for a specific part of your business, it can pay off to be upfront with lenders and investors. They may have more comfort in your plan if they can attach it to actual expenses like for R&D or to purchase specialized pieces of equipment.
You may only be able to use funds from financing options such as grants and loans for a specific.
While the business may not need money right away, it is essential to plan ahead. Know your options before you need them.
If you have a seasonal business with inventory requirements, plan to have funds lined up for purchasing products or supplies in time.
Building relationships with potential investors or lenders can also help; that way, you can reach out to them when the time is right.
Investments and loans will have terms and conditions attached to them. Professionals can help clarify the terms of your contract or its impact on your business or offer a new perspective.
Contact Glenn Graydon Wright LLP in Oakville for Guidance on how to Finance your Business Growth
Please seek advice from our tax professionals, accountants, or other financial professionals to ensure that you are well-informed about what is right for you and your business. The team at Glenn Graydon Wright LLP can review your options with you, as well as the benefits and liabilities of each as they specifically apply to you. Contact us by phone at 905-845-6633 or reach out online.