Please be aware that I have been paid to publish this post 3 alternative ways to finance the growth of your small business here on Morning Business Chat. As always, I hope you find this information helpful.
If you are an established small business owner, you may have reached a point where you feel that expansion is the right thing for your company. Growing your business is an exciting prospect and may prove extremely lucrative. If you are not in the enviable position of having the required funds to hand, you may be reliant on external funding to make your dream a reality. Here are 3 alternative ways to finance the growth of your small business.
Payroll funding
This type of funding is particularly useful for staffing companies but certainly isn’t limited to that industry. Many customers, as you will be aware, don’t pay their invoices on time. You supply the required goods and issue the invoice with a required payment period. Many ignore the timescales which can leave you waiting for payment for another month, sometimes more. As you will appreciate, this can leave any small business in a real financial bind. Payroll funding cuts out the wait allowing you to pay staff on time, which is essential if you are looking to grow. It would be unwise to employ more staff if you have no means to pay them or your existing team.
How it works is fairly simple. You advise the funding company of the invoices that you would like payment for, and they (under deduction of a fee) pay you the invoice amount. They are then responsible for obtaining the outstanding monies from the supplier. It’s a great way to ensure that there are no payroll delays. You can find out more information about it here: https://payrollfunding.com/
Small business loans
If you are looking to ramp up your inventory or perhaps expand into new premises, a small business loan is a great way to obtain a lump sum of cash. There are many lenders out there, so it’s a good idea to spend some time comparing interest rates and payment terms. Be aware that banks have fairly stringent lending criteria these days, so you might need to jump through quite a few hoops before funding will be offered. They need to know that you have the financial means to repay the debt and so, will require lots of information about your proposed expansion and the financial history of your business. If you have a poor credit rating or you can’t demonstrate that your business is secure, you may not be approved.
Equity funding
This is not something you should do without being certain that it is right for your business. Equity funding involves selling a percentage of your company in exchange for an agreed sum. You must carry out a detailed assessment of your company’s worth, including any stock and premises you may own. This will allow an accurate monetary value to be calculated for the proposed equity stake. Whilst this is a good way to get cash upfront, it does not come without risk. Selling a portion of your company now might be something you deeply regret in the future.
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