In order to grow your business, you have to burn a lot of money. Moving to a bigger office, expanding your staff and providing them with the necessary equipment is not cheap, which means that you have to find enough growth capital to pull this off.
The reason why we use the specific term growth capital is due to the fact that you already need to amass a small fortune in order to launch your business, which often leaves people quite thin when it comes to the expansion funds. With that in mind and in order to resolve this problem as effectively as possible, here are several tips on how to secure growth capital for established businesses.
1. A part of your profit
The first thing you need to do is make sure that a part of your profit goes directly to the expansion capital fund. The problem with this idea lies in the fact that you’re already starting your business in debt and that you have to reach the break-even point as soon as possible. By allocating a part of your resources, you’re setting yourself a tad further apart from this break-even point. In theory, the expansion always comes after the break-even point but it might be a good idea to postpone this goal of becoming fully profitable in order to lay a more solid foundation for future growth.
2. Selling your invoices
Another idea, that is quite controversial, is the one of selling your invoices to a factoring company. The major problem with this idea lies in the fact that you stand to make less money in the future, which is a problem, seeing as how growing your business is a task which has an objective of securing a brighter future for your business. However, due to the fact that a lot of expansion-related expenses tend to require immediate or up-front payments, this is a handy method that allows you to handle this issue. Unlike some other methods, you’re only using the money that you’ve already earned, even if you don’t have the privilege of time waiting for it to arrive.
3. Business loans
The simplest, the most efficient and the most common way of financing your expansion lies in applying for a business loan. Keep in mind that an increase in profit itself that comes from the expansion will be more than enough to cover the monthly credit payment, which means that you should have a net plus nearly every step of the way. Some entrepreneurs have trouble with their credit score or a lack of suitable collateral in order to get a secured business loan, however, there’s an alternative to this. Nowadays, there are platforms online specializing in unsecured business loans willing to offer quite favorable terms to ambitious and aspiring entrepreneurs.
4. Don’t forgive your debtors
A lot of small businesses lack a mechanism to make their clients honor their financial obligations. Just think about it, selling your invoices and assets seems inefficient when you have so much capital lying around that you just aren’t collecting. Therefore, the first resolution you need to make is to always ask for your money back. If you don’t know how to do this or are reluctant to get on the bad side of your clients (even feel like you’re strong-arming them), you might want to outsource this task to someone else. There are so many amazing debt collection agencies out there and this might be a great way for you to collect your money indirectly.
5. Teaming up
Lastly, you don’t have to take all of these expenses on your own, seeing as how finding a partner is a simple and reliable way for you to get a grip of things. However, you don’t have to find a partner in a traditional sense. Sometimes, managing to grab the attention of an angel investor or a venture capitalist can be just as efficient of a solution to your problem. Keep in mind, nonetheless, that this often means forsaking a share of control in your company, which is the last thing that a lot of entrepreneurs are willing to part with.
The reason why these five methods are so great is due to the fact that that they have no impact on your existing business structure and don’t require you to change your goals and objectives. They’re efficient in a way that they give you the means to handle this problem to the best of your abilities. Also, the very fact that you have so many options available means that you get the freedom to choose the one that you find the most fitting.