How to find the right funding options for your growing business

Want to expand your business and need cash to do so? Find out what funding options are available to you.

Growing a business takes capital. Whether you’re looking to hire more staff, invest in new equipment, move to a larger space, or launch a new product line, you’ll likely need an influx of cash to fund that growth.

Finding the right funding options to fuel your business’s expansion is crucial. Here are some tips on exploring the financing landscape and choosing the best sources of funding for your growing company.

Assess your capital needs

Before you start searching for funding, take time to thoroughly assess your capital needs. How much money do you need to fund your growth plans in both the near-term and longer-term?

Document the specific uses for the funds – is it for purchasing new technology, opening another location, adding inventory, hiring sales staff? Get clear on the precise amount required so you can target funding sources to match your needs.

Understand the costs and terms

There are many options for accessing capital, but each comes with different costs, requirements, and terms. Carefully research, perhaps reading a newsletter that offers advice on raising capital, and understand the fine print before committing to anything.

What fees come with the financing? What are the payback terms – how quickly must the capital be repaid? Are there certain milestones or targets the business must hit? Know the total costs and strings attached before finalizing financing decisions.

Look internally first

Before looking externally, exhaust all internal funding sources. Can you reallocate existing cash reserves or cash flow to fund projects? Can you pause dividend payments to shareholders temporarily? Could the owners contribute more equity? Look for internal resources first before taking on the cost and dilution of external financing.

Tap your bank

One of the first places to look outside of the business is your current bank. They already know your company and leadership, putting them in a good position to fund growth plans. Banks can offer business loans, lines of credit, and factoring services. Be ready to provide financial statements, tax returns, business plans, and other info banks will want to analyze.

Consider government programs

The Small Business Administration offers a variety of loan programs aimed at helping small businesses grow. Community development financial institutions also offer loans targeted to certain geographic areas or segments. Check to see what government-backed loan programs might be available to fund your particular business goals.

Look into crowdfunding

Crowdfunding platforms like Kickstarter and Indiegogo allow you to raise smaller amounts of capital from a large audience through an online campaign. Offering future discounts, merchandise, or equity to your supporters helps incentivize funding. This works best for funding discrete, specific projects with a compelling story.

Seek equity investment

Equity funding involves exchanging a portion of ownership in your company for capital investment. Angel investors and venture capital firms are potential sources of significant equity financing. This works best once you have an established track record and strong growth projections. Expect to give up a sizable stake and decision-making power in exchange for capital.

Choose the right mix

Most growing firms use a combination of funding sources. For example, you might look to crowdfund a new product line while using bank financing to open a new location. Understand all of your options, determine which ones align best with your goals and risk tolerance, and create a customized funding mix to fuel your next business growth phase.

While bootstrapping a business is a great idea, it doesn’t work for everyone. Therefore, it’s important to use the right funding options for your growing business, as the wrong ones could cost you money and negatively impact the future of your business.