Do you feel like your business has outgrown its current resources?
Whether it’s a new product line, increased staff, or expansion into international markets – business growth requires investment and financing.
If you’re feeling anxious about the expense of running an ever-growing organization, don’t worry. Growth financing can provide the cash flow needed for sustainable expansion — let us show you how!
What is Growth Financing?
Growth Financing is a type of business financing that provides cash for businesses to fund growth and expansion-related activities.
Business finance and loans are commercial loans that allow short-term growth initiatives.
Business growth finance is more typically a longer-term loan option for businesses needing capital for growth over several years.
Common growth finance activities include:
• Launching a new product line
• Expansion into international markets
• Hiring more staff
• Increasing advertising/marketing budgets
• Purchasing additional equipment
• Making capital improvements
Growth financing can come from various sources, including bank loans, private lenders, and venture capitalists. Each source has different requirements and criteria for approval, so you’ll need to research before applying.
How to Finance Business Growth
Financing growth for your business can be tricky — but with the right strategy, you can secure the funds needed to keep your organization growing.
Here are some methods of growth financing to help you get started:
- Angel Investors
- Venture Capital
- Short Term Bank Loans
- Home Equity Loans
- Non-Bank Cash Flow Lending (Enterprise Value Lending)
- Mezzanine Financing
- Debenture Lending
- Recurring Revenue Lending
- SBA Loans
- Credit Cards
Bootstrapping is the most common growth financing method involving reinvesting profits and resources to fund growth. While it’s not always easy, this self-financing method can help you maintain ownership of your business while keeping debt levels low.
If you’re looking for a more traditional growth financing option, consider applying for a bank loan or venture capital funds. With the right strategy, you can secure growth financing that meets your needs and helps propel your business to new heights!
Crowdfunding platforms like Kickstarter, Indiegogo, and GoFundMe offer an excellent growth financing option for businesses looking to raise funds quickly. All you have to do is create a campaign page, post it online, and promote it — then watch the donations come in!
The great thing about crowdfunding is that anyone can participate — not just accredited investors. And because crowdfunding campaigns are public, they can help you boost brand awareness and introduce your product to a larger audience.
If you’re looking for growth financing without the strings attached, consider reaching out to friends and family. They may be more willing to lend money than a bank or venture capitalist — plus, they’ll usually charge lower interest rates.
Just remember: growth financing from family and friends should always be treated like a loan. Get everything in writing and make sure everyone understands the terms of repayment.
Angel investors provide growth financing in exchange for a stake in the company. This type of growth financing is ideal for businesses that need significant capitalization but don’t have access to traditional financing sources.
Angel investors typically invest anywhere from $25,000-$500,000 — and often offer more than just money. They might also provide valuable advice and connections to help you grow your business.
Venture capitalists provide growth financing to companies with the potential for high growth. They usually invest in businesses with innovative ideas and a strong management team.
Unlike angel investors, venture capitalists tend to be more selective about the types of businesses they fund. The capital provided also tends to be larger — typically around $1 million or more.
Short Term Bank Loans
Short-term bank loans are one of the most popular growth financing options. This loan is usually used to fund working capital and business expansion projects, such as purchasing equipment or hiring new employees.
Depending on your creditworthiness, these types of growth financing can be either secured or unsecured. You’ll need to pay back the loan within a certain time, so make sure you can do so before taking out a short-term loan.
Home Equity Loans
If you have equity in your home, you may be able to use it as growth financing. Home equity loans are typically used to finance major projects, such as renovations or expansions.
You’ll need to provide proof of ownership and a list of assets, so make sure you’re prepared before applying for this type of growth financing.
Non-Bank Cash Flow Lending (Enterprise Value Lending)
For businesses looking for growth financing, non-bank cash flow lending is a great option. This growth financing provides access to capital without having to put up collateral or go through lengthy bank loan applications.
Non-bank lenders tend to look at the overall value of your business — not just its debt levels — when determining whether to provide growth financing.
Mezzanine financing is a type of growth financing that combines debt and equity. It’s usually used to fund business growth projects and provides access to capital without having to give up too much control of the company.
Mezzanine financing can be a great option for businesses looking to raise funds quickly — but make sure you understand the terms and conditions before signing on the dotted line.
Debenture lending is a type of growth financing that provides capital with no strings attached. This type of growth financing is especially popular for businesses that need short-term capital and don’t have access to traditional bank loans.
Debenture lenders will typically provide growth financing in exchange for a percentage of the company’s profits — so make sure you have a solid business plan and understand the terms of repayment before signing up.
Recurring Revenue Lending
Recurring revenue lending is growth financing that provides access to capital with minimal risk. This growth financing option is ideal for businesses with regular income streams that need additional funds quickly.
The lender will typically provide growth financing in exchange for a percentage of the company’s revenue — so make sure you understand all the terms before signing up.
Small Business Administration (SBA) loans are growth financing providing access to small business capital. SBA loans are typically used to finance growth projects, such as expansions or new equipment purchases.
SBA loans have some favorable terms — including lower interest rates and longer repayment periods — but make sure you understand the terms and conditions before signing up. Here are a few simple steps to apply for a small business loan.
Using a credit card for growth financing can be a quick and easy way to raise funds. Credit cards typically have higher interest rates, so make sure you can afford the payments before taking out this growth financing.
Credit cards also typically come with rewards — such as cashback or airline miles — which can help offset some of the costs associated with growth financing.
Growth Financing Wrap Up
No matter what type of growth financing you choose, always make sure to do your research and understand the risks before committing to anything.
With careful planning and due diligence, growth financing can be a great way to fund business expansion.
Do you have any questions about growth financing? Let us know in the comments below!
Growth Financing FAQ
A company can finance growth through a variety of methods, including bank loans, non-bank cash flow lending, mezzanine financing, debenture lending, recurring revenue lending, SBA loans and credit cards.
The risks associated with growth financing vary depending on the type of financing you choose.
Generally, growth financing can be risky if you don’t understand the terms and conditions of repayment or have an inadequate business plan. It’s important to do your research and weigh the pros and cons before committing to any growth financing option.
Growth stage investments are investments in companies that have already achieved growth and are looking to expand further. These investments often come from venture capital or private equity firms, which provide growth financing in exchange for a stake in the company.
Growth stage investments can help companies fund expansion projects, but they also carry a higher level of risk than other growth financing options. Make sure you understand all the terms before signing up for growth stage investments.