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There are countless possibilities to grow your company, however many business owners can struggle to obtain the necessary funding to support their plans. A lack of appropriate funding is one of the main reasons why firms fail to scale. If you are unable to access the right source of funds for you, you are unlikely to grow significantly.
When deciding how to fund business growth, there are a number of key points to consider. It is also a good idea to seek specialist assistance to make sure you are funding your growth ambitions in the best possible way for your company and individual circumstances.
Finding the Right Sources of Funds for Business
If you are wondering how to fund business growth, the first thing you should consider is which type of funding sources will be most appropriate. It is important to remember that no two companies are ever the same, so what works for one firm may not have the same effect for you.
Deciding between the different sources of funding for your business will typically be facilitated by several important factors, such as:
- The size of your business
- How much money you require
- The level of control you wish to keep
- How quickly you need the funds
- The nature of your growth plans
If you would like to find out more about finding the right sources of funds for your business, please check out our blog on the matter.
Should you require further assistance, it is essential that you seek independent and specialist advice at your earliest convenience. Choosing the incorrect option could cost you a lot of time and money in the long run, so it is always better to be safe than sorry.
How to Fund Business Growth
Now that we have discussed how to decide between the different sources of funding for your business, the next step is to outline all of the options that are available to you:
Borrowing funds from a bank is a trusted and common source of funding for small businesses. Almost all banks will offer loans between £1,000 and £50,000 with relatively flexible repayment terms. They are particularly popular with entrepreneurs because you would not have to give up any control over your firm, nor sacrifice a portion of your future profits once the loan has been repaid.
Securing a loan can be challenging, however, as you will need to demonstrate to the lender that you are a good investment and will be able to repay what you borrow. It is therefore a good idea to construct a solid business plan that convinces the bank to part with their cash.
Another point to consider when thinking about obtaining a bank loan is that it can take a while for your application to be processed. As a result, this is probably not the best option if you need the funding in a relatively short space of time.
An angel investor is usually a high net worth individual who invests in early-stage businesses. They will typically have amassed a great deal of experience in building successful enterprises, and will be keen to share their knowledge and insights to help your firm grow. This could prove to be a great way to access invaluable expertise.
That being said, angel investors will want to be sure they are injecting funds into a business that is worthwhile. Because of this, they may ask for a slice of equity from your firm, meaning you will need to give up some control of your firm. This is often too much for some entrepreneurs to stomach.
Peer to Peer (P2P) Finance
Peer to peer lending involves matching up smaller-scale investors with businesses that are looking for funds, thereby cutting out the middle man. It can be applied for online and the money will be obtained by drawing from a pool of cash that has been put together by savers who are looking for a better return on their money.
This type of finance is relatively simple to apply for and works in a similar way to a bank loan. If you end up struggling with your repayments, the usual rules about debt recovery will apply.
This process works best with consumer-facing businesses that have a product or vision that people can get behind. It involves asking a large number of individuals to contribute relatively small amounts of money. In return, they may be the first to receive new products or ongoing perks.
Crowdfunding could also result in your backers each taking a small stake in your firm, almost making it a digital-age version of selling shares. It has been known to achieve great success, with some companies raising over £4 million from thousands of micro investors. Much like angel investors, you will need to decide whether you are comfortable with giving away part of your firm in return for the cash injection.
Using Your Own Money
You can, of course, use your own funds to raise money for your business. One way to do this is to invest in share capital by buying more shares in your company. This has the effect of increasing the assets of your firm, but will tie up your funds until these shares are sold on.
Another potential way to fund your business is by lending it via your director’s loan account. You can then pay the funds back to yourself whenever necessary.
High Value Clients
The final potential option we will cover in this blog may seem a little left-field. However, an excellent alternative strategy to borrowing or risking money is to pour time and energy into your highest-value clients. These can be defined as individuals who spend the most and always pay on time.
Although you may not be able to sustain the increased rate of spending over the long-term, a particularly well-organised strategy could improve your cash flow and allow your firm to grow without any of the usual risks.
How Inquesta can Help with Corporate Financing
If you are wondering how to fund business growth, you can rely on Inquesta to help. We provide a comprehensive range of services to company directors and adopt a truly personal approach throughout the entire process.
Our starting point is to gain a thorough understanding of your individual circumstances and requirements. Once we have developed a clear picture of the situation, we will use our decades of experience to provide the right solution for you.
Throughout our history, Inquesta has formed working relationships with specialist business finance providers who are committed to helping company directors find the right way to grow their enterprise. One such firm is Business Finance House, which can assist with everything from asset finance to growth financing and cash flow support.