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How to finance growth

Inflation is piercing, and interest rates are increasing but that’s no reason for a business to stagnate. You just need to know how to finance growth.

Growth is the intent of a good and profitable business. Transitioning from small to medium and medium to an enterprise isn’t as imposing a goal as one might think. You can use finance to incite your business growth and take it to the next level. We have some ways to spur your growth using accessible finance

Set up bookkeeping and business accounting to finance growth

If you have a small business and are doing your accounting on spreadsheets or, even worse, in books and ledgers, you need to use what the larger companies use to be on par. You should have professional accounting software (preferably cloud accounting software), business bank accounts, and regular accounts receivable and payable reporting. Doing this keeps track of your business’s lifeblood and cash flow.

Establishing your plan to finance growth

What is your company’s growth plan? You need to consider this. Specific, Measurable, Achievable, and Time-Limited (SMART) plans are required. Construct a vision statement like “15% more market share in two years”.

Next, create a strategy and tactics. Consider: investing short-term liabilities in long-term assets is a risk. The asset’s funding has to meet the liability’s timeframe. For instance, a five-year car loan, as this can cause cash flow to wane and your business to possibly shrink or fail.

Look at business loans.

Once you have a plan in place, it’s imperative that you and your partners  investigate attainable interest rates on business loans and assess where they can be applied to invest in your growth strategy.

It will determine the amount of the loan, the term and your projected return on investment (ROI). Some loans may need collateral, while unsecured business loans may be approved within a day, permitting your business to seize clear and present opportunities. Make sure to not that the aim is to keep cash flowing and trending upward.

1. Talk to your bank

Your business bank will offer various options. It is a good idea to take advantage of a one-on-one meeting with a business manager to discuss your particular needs.

Their priority will be to establish a sound understanding of your financials and cash flow projections. That being the case, be prepared to present and discuss this information in your meeting. Products available from most banks include:

Business loan

business loan could be the option to take if you’re purchasing expensive equipment, property, or even a company. Unsecured loans may be available for shorter timeframes, such as up to five years, while you can pay off secured loans over terms such as 25 or more years.

Business overdraft

An unsecured business overdraft can help you control your cash flow and cover business expenses without having to provide any security. Typcally, this financing option has no fixed term, and you repay what you can when you can, within the limit you’ve agreed with your bank.

Business credit card

credit card is an easyway to purchase now and pay later. Cards range from low-rate options to those that reward you for everyday business purchases and innumerable offer an interest-free time period of up to 55 days.

Prior to making any decisions about finance, don’t forget that credit providers apply credit criteria and other conditions and fees.

2. Find an angel investor

Angel investors are business professionals who look for businesses (or creative initiatives) in which to invest. They are usually seeking short-term returns and medium-term sale value.

If you run with this option, you will be inviting people to become shareholders in your business. You will need to be comfortable with their input and scrutiny. In return, they may bring experience, ideas, direction, and investment.

Angels can be difficult to find. Start by reaching out to the small business association in your region. There will be much for you to consider, including the documentation of the official agreement between yourself and any other third party. Sound professional advice is a must.

3. Apply for a government grant

Government-funded grants are available in many industries, and many are to support growing businesses such as yours.

Grants are generally low-risk funding, as you may not have to pay anything back. Although, the application process may be lengthy and complex, and there could be limitations on how you can use the money.

Begin your search for a grant on the Business.gov website.

4. Contemplate crowdfunding

Crowdfunding is a contemporary way of raising funds online, generally in small amounts from a large group of people. In exchange for their contributions, you may offer investors perks or rewards or equity in your company if you choose to.

This securing of funds is accessible on various websites, giving you prospective access to thousands of investors. Although, it may require you to give up some control of your business, and you may not be able to raise the total amount you require.

5. Lease rather than buy

Although not a financing option, leasing business equipment like machinery or cars can give you access to essential tools for growth without you needing to make expensive outright purchases. As a result, it can help support your business growth without significantly impacting your cash flow.

Alternative finance growth options

Growing a business can transition to alternative finance options. The most typical types of business finance outside of loans are lines of credit and invoice factoring.

Businesses can use a line of credit instead of a loan for a specific amount. A lender will yield your business credit instead of cash, and you only pay interest on the amount you use. It can help with cash flow hiccups or seasonal slowdowns and help keep your growth plans on track.

Invoice factoring or financing helps preserve cash flow by borrowing against outstanding invoices. Doing this preserves operating capital. Low-risk lenders discern it as a cheap way to acquire early sales value. The invoice itself secures the loan, so you don’t require collateral. Don’t become too dependent on invoice factoring, though — it could cause sudden cash flow bottlenecks.

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If you require any financial advice on growing your business, please contact us