Financing growth for your small business can be a tricky prospect – but for the vast majority of companies, it is critical. Without finding investment, you will struggle to get through tough periods, expand, or maybe even survive.
So, funding is essential for most – but where do you find it?
We’ve pulled together some ideas for you to get started with – read on and let us know your thoughts in the comments section below.
Self-funding
The easiest way to get started is to self-fund your business. Do you have savings put away that you could use to invest in growth?
You might have assets in your personal life or business that you could sell to free up cash, too. Or, you could use a credit card.
In the vast majority of cases, this type of funding will only give you a small amount of money. But, it might just help you start generating the profits you need to stimulate your growth.
Banks
Banks have been notoriously tight with their money over the past decade of so. But that’s not to say you shouldn’t try and get a loan from them, as they can be cheaper and have less impact on your business than other funding sources.
However, your interest rates will be dependent on your credit rating – and can be cripplingly high.
Loved ones
The chances are that you have friends and family who have savings. And, as everyone knows, interest rates are incredibly low at this point in time.
So, what if you offered them a more preferable rate of interest over the next five years? It would be more than their current rates, but lower than what you will be paying for a bank loan.
Everyone’s a winner, right?
Private investment
There are many private investors out there – and in many different forms. Venture capitalists, angel investors, even crowdfunding – can all help. The trick is to make sure that you are appealing to these private investors.
As The Fortunate Investor points out, there are a few things to consider. Private investors want to minimize risk and build strong portfolios. Some will also need to be sure that they will get a return on their investment in the long-term. Others will be looking to maximize this over a shorter timespan – over 5 years, say.
The key to success in attracting private investment is to know how to push their buttons.
Invoice finance
Finally, consider using invoice financing. You provide a service to your customers, and then give them an invoice. Instead of waiting 30-60 days for them to pay, you pass on your invoices to a financing company who pay you up to 90% of the money.
While you won’t make as much profit, you will get your money a lot quicker than through the traditional buy-and-sell route. You will make more sales because customers won’t have to pay right away, and the financier will guarantee you a set amount.
For more information click here to see a comprehensive guide about finding investors from HowToStartAnLlc.org.
OK, so there you have it – a few clever ways of finding funding for your small business growth. Let us know how you get on!
Steve says
November 16, 2016 at 10:26 amI find self-funding the best way to start a small business. If you are already in debt with a bank, how can you handle if things go wrong?
Erik Emanuelli says
November 16, 2016 at 10:28 amAgreed. Unless you have a big project and you need a big amount of money.
But yes, talking about small businesses, self-funding has lots of pros.
Thanks for sharing your views, Steve.
Sathish Arumugam says
November 17, 2016 at 4:01 pmHello Erik,
You are one of my favorite bloggers. I always use to have a view on all your latest post which help me in various projects and circumstances.
Indeed as the fund raising concepts are universal, it is perfect timing post and made a sparkle on my mind to start up a new small project!
Thanks for the shout out Erik!!
Erik Emanuelli says
November 24, 2016 at 11:35 amThanks for the kind words, Sathish.
I’m happy to help! 🙂
Kuldeep says
November 18, 2016 at 7:45 amHi Erik,
Some great ways for small business growth mentioned here. I personally believe self funding is a great way to grow small business growth.
Thanks for sharing this post.
Erik Emanuelli says
November 24, 2016 at 11:36 amI’m with you here too, Kuldeep.
Amar kumar says
November 22, 2016 at 11:29 amHey Erik,
Self funding is really great for entrepreneurs to fund their businesses. Friends and family funds are generally considered as debt funding but it is also a good way to fund a small business to set up. But i have experienced this funding cause ruin relationship, if loss of capital or failure in businesses. Eventually, thanks for exploring amazing thoughts.
With best wishes,
Amar kumar
Erik Emanuelli says
November 24, 2016 at 11:38 amNice point of view, Amar!
Never mix up business and love relationships/friendships.
Peter Clarkson says
November 22, 2016 at 11:01 pmHi,
Thank you for your article and at least bringing up the issue of self-funding for small groups.
Erik Emanuelli says
November 24, 2016 at 11:39 amGlad you liked it, Peter.
Sonali Melen says
November 25, 2016 at 9:25 amI guess self-funding is the best way to start a SMB. If you’re already in debt with a bank then how can you handle if things go wrong?
thanks..
Sonali
Erik Emanuelli says
November 28, 2016 at 10:19 amGood point of view, but it depends on your business plan, I think.
Anyway, I think self-funding is the best way to start a small business.
Abdul Samad says
November 26, 2016 at 4:49 pmHi Erik,
Loved reading your article brother.
You’ve covered some great points here.
You’re right investing in assets and then getting ROI from them.
Keep it up!
Erik Emanuelli says
November 28, 2016 at 10:19 amThanks for the nice feedback, Abdul.
Robinson says
January 9, 2019 at 3:49 pmI am about to approach a Bank for my next startup. You have a nice article up here that gives various options. I am kind of narrowed down my thoughts to Bank for my investment needs. Now i am thinking about other options as well 🙂
Thank you Erik. I am going to try other methods before approaching bank as the only way for my investment needs. Cheers.
Robin.