All entrepreneurs aim to create a successful business. Regardless of whether your business plans focus on expanding, growing operations, or getting more investors, you’ll need to find a way to finance your business growth somehow.
However, like other investments, creating a successful business often means strengthening your cash flow to gain more growth opportunities. The more often a business owner can access funding, the more their production capacity can increase, bringing in new customers.
There are various ways to finance your business growth, from getting the necessary capital through loans to receiving government grants for small businesses.
This quick read will discuss some of the various financing options available for many businesses. These options may help expand your operations and introduce new opportunities for your business.
Business Loans
A business loan is a financial agreement between a business owner and a lender, typically a bank, to receive a set amount of funds for expansion. They may use the business loan funds to buy new equipment, increase their product lines, or gain additional resources.
However, since the bank or other lenders do not dictate how you spend the money from loans, you may spend it in whichever way is best for expanding.
These are some of the many advantages of using business loans to finance your business growth:
Receive cash immediately after the approval, increasing your cash flow.
Lenders typically must be fully transparent over set terms such as rates, credit requirements, and the money needed to repay the loan.
Businesses can have more freedom to buy equipment, expand physically, or finance employee wages.
Other loan types, like asset-based lending, let you use valuable assets, such as accounts receivable or physical assets, to secure loans and gain more capital.
Thanks to this financing option, both new businesses and established ones can increase their cash flow.
Despite some potential risks from loans, such as high-interest rates or predatory lenders, business loans can still help to finance your business growth through trusted lenders with a transparent process.
Crowdfunding
Another great way to finance your business growth is through crowdfunding.
Crowdfunding relies on the support of a business’s audience to gain more funding for particular projects. With crowdfunding websites like Kickstarter, businesses get the capital required for a product or project through donations from their “investor” or audience.
Through the added funding, the business may return the investment to its audience by releasing rewards and special perks.
For example, those who provide the most financial support may gain unique benefits, like personalised merchandise.
Compared to other potential financing options, crowdfunding stands out as it can bring in potential customers while potentially strengthening relationships with current audiences.
As their audience helps fund the project and receive advantages for what they invest, the business gains more money to serve them better, increasing trust.
Crowdfunding can not only help you finance your business growth for long-term success, but it can also strengthen growth within your audience.
Working Capital Funding
Seasonal businesses may struggle with cash flow during off-season months. However, working capital funding is one of the financing options they can focus on to maintain cash flow.
Working capital funding helps finance your business growth by giving you money to maintain normal operations during low cash flow moments.
It is usually a short to medium-term loan that’s used for maintaining business cash flow when external factors affect it. With the added funds, businesses can avoid the risk of lowered income or relying on other sources for financing.
Businesses in the early stages of developing an innovation or new project may also use this option to fund their investment.
These are common examples of working capital funding:
Revolving credit facilities
Asset refinancing
Trade finance
Overdrafts
Supply chain finance
Invoice finance
Off-balance sheet financing
Like any loan, financing your business growth through this option requires repaying the loan after a set term. This risk may be avoided by noting the repayment deadlines and minimising business loans to match only the needed money.
Even with the necessary repayment, financing employee wages, expansion, or equipment can become easier thanks to the added money this financing option can provide.
Debt Funding And Equity Financing
Debt funding is the process of borrowing collateral through third-party sources, like lenders or banks, to finance your business growth. It works like a loan, where the borrowed collateral has to be repaid by a set deadline.
In return for the debt funding, creditors receive interest on the borrowed money. By financing business growth with this option, you retain equity, meaning you still have complete control over how you use the loan.
An advantage of debt financing is that interest, fees, and charges are tax deductible. You do not need to share business profits with the lender, so you can avoid certain risks like continuously getting loans. With the added market share, more growth is possible.
Equity Financing
Equity financing works similarly; however, when a lender helps in financing business growth, they will receive a share of the business.
Additionally, these lenders expect to have some level of influence over business decisions. A common example is when a business has a board of directors. Some are called “angel investors,” or people who can invest directly into the business to receive equity.
A key advantage is that you do not need to repay the financing from the loan. However, some owners may be hesitant to give shares to investors.
In essence, some angel investors may extend credit or funding to small businesses in exchange for a say in the businesses’ direction.
Government Grants
Government grants provide direct financing to businesses. They usually fund large research projects, infrastructure, and expansion.
These grants focus on businesses that foster innovation through new developments and research topics.
Most include opportunities for career training, which can help business owners further increase their profits through better services and employees.
The eligibility and requirements vary depending on the grant. However, they are still a great way to finance your business growth, especially if the funded project positively impacts your industry.
Conclusion
Financing business growth may take various forms. Whether you choose crowdfunding or government grants, the most important part is how you use the funds.
Expansion is an exciting milestone, and creating a budget plan or investing in business loans can provide beneficial opportunities to foster continuous growth.
Finding the right business loan lender in Australia may be time-consuming, but it does not need to be.
By visiting Lumi today, you can learn more about trustworthy and secure business loans that can push your business forward.
If you’re ready to apply for a Small Business Loan or a Line Of Credit to finance your business growth, click here.
Got more questions? Get in touch with our friendly team via phone at 1300 005 864 or email sales@lumi.com.au.
Disclaimer: We try our best to fact-check all information and keep it up-to-date, but this can not always be guaranteed. All of the information shared is for general use only and should not be considered personalised financial advice. Make sure to consult an accredited accountant and/or financial adviser for personalised financial advice.
