Small business owners are always looking for new ways to grow their company and improve it. This will require funding at some point to cover expenses. It is more difficult than you think to get additional capital because of the many roadblocks.
In 2023, data shows that 59% of SBA applicants received funding but only 34% were fully funded. For those who were denied or did not receive communication, these were the main reasons:
- They had only operated their business for a few months
- Credit history for personal or business accounts that are poor
- Missing loan documents
- Financial documentation lacking
These issues apply to any funding. How can you prepare for to pitch your business? to apply for loans? Or develop alternative funding options. Start by creating a growth strategy.
Create a growth strategy using your business plan
It is important to have a strategy for growth. This is a simple business plan, but it’s focused on the strategies that you must implement and key milestones to help grow your business.
Your financial forecasts are important
The most important part of this plan is the financial forecast. It will help you to understand the amount of money needed to fund growth based on your projected figures. This will help you to show how you plan to use the money once you have it.
Even a rough distribution (i.e. Investors and lenders can be convinced of the viability and feasibility of your plan by a rough distribution of funds (ie. It is possible that this will change when you receive the money and begin to use it. Planning ahead and thinking about the use of the money can help you optimize your investment and better manage it.
Your growth plan can be a tool for growth
You will have the tools to manage your company and get the funding that you need for growth. You’ll need to create a well-organized, professional plan that includes realistic financials, whether you run a home-based company or a biotechnology firm.
Over the years, our customers secured hundreds of millions in investment capital as well as small business loans. We want to help you get the funding that you need to grow.
Funding your business: Key options
After you’ve created your plan, you will need to decide which funding methods you want to use. Your decision will be influenced by how much money you need, how much risk you are willing to take and what funding options you can access.
You’ll likely use multiple funding options to boost your cash flow and increase growth. These are some common funding options that you should consider.
1. Bootstrapping
Bootstrapping your business means that you fund your business using your own money, whether it’s through personal loans, SBA-backed loan, credit lines, credit cards, or savings. Continue reading to learn more about loans.
Bootstrapping is different from taking angel or venture capital investments because you don’t give up ownership or equity.
Bootstrapping means you’ll need to produce revenue as soon as possible for your business to continue funding it on your own.
Bootstrapping allows you to retain full control over your company. This often looks like working on your business idea while holding down a job.
2. Bank Loans
Bank loans are a good source of medium- or long-term financing. The bank determines the length of the loan (ex. 3, 5, or 10) and the interest rate, as well as the amount and timing of the repayments. It’s best to use a local credit union or bank, so you can speak directly with a representative about your loan application.
The bank will also require you to provide collateral (“collateral”) for the loan. In the case of startups, the security is often provided in the form personal guarantees by the entrepreneurs.
3. SBA-backed loan (U.S.).
In the U.S., the Small Business Association offers several different loan programs via participating banks throughout the country. These programs are tailored for small business owners and are usually less risky. You’ll need to establish a relationship with your local bank or credit union to get access to the SBA programs.
SBDCs (Small Business Development Centers) receive state and federal funding to help you for free. SBDCs are funded by the state and federal government to provide free assistance. Take advantage of their experience.
4. Financing from friends and family
When you receive money from your friends and family, it is a form of funding. Money can be received in the form a loan or equity.
It can be difficult and emotionally charged to take money from family and friends.
It can be helpful to share your business plan with your family so they know that you’re thinking about the future. You should seek legal counsel to ensure that your business plan is set up correctly from the start. It is not good to have family members and friends fight over money or business.
5. Crowdfunding
In order to raise money through crowdfunding, you need to ask people for a certain amount of cash for a project or cause in exchange for rewards. Equity, donation and debt are the three categories that crowdfunding falls under.
Remember that each crowdfunding site is different and has its own requirements for raising and acquiring funding. Be sure to carefully review all of your options and read the fine prints before committing yourself to a particular platform.
6. Angel investors
Angel Investors are wealthy individuals who provide capital to companies (typically startup businesses), in exchange for convertible loans (where debt is intended to be converted into equity later) or ownership equity claims (a residual claim over ownership assets). They typically invest less than $2M but most commonly between $50,000 and $250,000.
Angel investors are not the best option if you don’t have a exit plan in place for your company. They are interested in investing in companies to earn a return.
Angel investors may be the right choice for you if your goal is to expand your business, sell it or acquire other businesses. You could even go big with an IPO. If your goal is to own and operate your business forever, or to grow it, then you might want to reconsider approaching angel investors.
7. Venture capitalists
A Venture Capitalist (also called a VC), is a person who invests in businesses by providing capital to start-up or expand. VCs seek a higher return on investment than traditional investments. VCs typically invest between $500,000 and $10 million. If you want to bring in VCs, your growth strategy must be very aggressive.