6 Smart Ways To Finance Business Growth

All startups and small businesses face numerous challenges. One is the lack of enough finances to grow and expand their operations. As a result, some of them can't cope with the market competition. Therefore, lack of finances is perhaps one of the reasons some small enterprises fail during the first few weeks or months of operation.  

This article is for you if you're struggling to find effective ways to finance your company's growth. It explains some clever ways you can adopt when securing capital for your business. Some of these include:   

1. Apply For Loans 

The first and most common way to finance a company's growth is by applying for loans. This method involves borrowing money from financial lending institutions like traditional banks, micro-finance, and online platforms.   

The amount borrowed is known as the principle and is to be refunded plus the accrued interest in equal monthly installments. Failure to pay the installments on time may attract some penalties.   

Indeed, applying for a loan can be one of the quickest ways to finance your small business. However, you must be in good standing. In simple terms, your credit score must be good.  

A credit score is a three-digit number ranging from 300 to 850 and determines your creditworthiness. You'll barely qualify for any loan if your credit score is close to 300. For that reason, you must work towards the 850-mark credit score. You can achieve that by establishing your credit history, keeping your credit utilization low, checking and reporting for errors on your reports, paying bills on time, and monitoring your credit files for fraudulent activities.  

That said, the amount to apply majorly depends on your needs. However, you must only apply for the amount of money you can pay with ease. That ensures you don't have many problems when making your monthly payments.    

2. Find Aid From Friends And Family Members

Finding aid from friends and relatives is another common way to finance a company's growth. It involves requesting family members and friends to help fund your business.   

You'd want to seek aid in financing your business for various reasons. For instance, most of these people will want to see you succeed. As such, they may consider providing non-refundable money. In other words, they may not require you to return the money you took.  

You must also understand that seeking aid from family and friends is one cost-effective way to finance your enterprise's growth. That's true since the money doesn't attract any interest in most cases. Therefore, if you were to repay the money, you'll most likely return it at zero interest rate.

Apart from that, looking for aid from family and friends allows you to bargain for better repayment schedules and duration. Therefore, you won't be pressured to refund the money. And that goes a long way in boosting the growth of your business.   

3. Look For Government Grants

If you're looking for the cheapest way to finance your company's growth, then looking for government grants could be the best deal. It is free money awarded by the state to entrepreneurs who want to grow their ventures. In simple terms, a government grant is non-refundable. However, your business or project must be created to serve the interests of the larger population to qualify for government grants.  

Indeed, looking for government grants can be one of the smartest ways to finance your enterprise. However, this financing is hard to apply for, and you might not qualify for it if you aren't careful. Therefore, you must follow the guidelines when applying for government grants. For instance, you must prove that your company holds a non-profit status in its registered country. Apart from that, you must submit your application on time.   

4. Consider Invoice Factoring 

Selling goods or services on credit is one of the best ways to attract customers. In this selling method, customers can use your products or services and pay later when they get money. However, such arrangements can put your company in a financially distressful situation. That's true since you may lack enough cash to finance operations, especially when clients take too long to pay their dues. But the good news is that you can enter into invoice factoring arrangements to finance your enterprise.  

Invoice factoring is a business arrangement where you partner with a factoring company to settle your debtors' accounts. The company you've partnered with will buy your accounts receivables at a discount. That ensures you've got immediate cash to grow your business instead of waiting for your clients to settle their dues.   

Besides providing immediate cash, working with an invoice factoring firm helps save time. For instance, no company employees will be responsible for collecting debts. It'll be the responsibility of the invoice factoring company to trace debtors and remand the money owed to them. Workers can utilize the saved time to complete other essential tasks. That goes a long way in promoting your company's overall productivity.  

5. Find Angel Investors

You can also find angel investors to finance the growth of your company. These individuals have great wealth and are ready to fund startups in exchange for equity ownership. In other words, angel investors will own a share of your company, which should be equivalent to what they invested in your enterprise.   

While partnering with angel investors can be an excellent way to get finances, you must be careful not to lose control of your firm. That can happen if the angel investors put more money into your company than you did. Therefore, if you aren't cautious, you might become a minority shareholder in your own company.   

6. Talk To Customers

Although not commonly used, talking to customers can be another effective way to finance the growth of your enterprise. This method involves requesting clients to make advance payments for goods and services. However, that can only happen if you've already built robust customer relations.   

You can also encourage customers to purchase in cash instead of credit terms. That ensures you always have enough money to help your company remain afloat.   

Takeaway

Running a successful company requires you to have enough finance. For instance, you need money to pay suppliers and workers, transport goods, market your business, etc. Your company will barely grow if you don't have enough finances.  

The best way to finance your firm's growth could be to use retained earnings. However, if that isn't sufficient or available, you can opt for other methods as detailed above. But you have to utilize the most suitable option for your company. Otherwise, you may end up with less money.