How to finance a growing business

Published on Jul 01, 2021

How to finance a growing business

When your business begins to grow, it can feel both exciting and intimidating. Increasing demand creates new opportunities, but it can also present new challenges—particularly around financing. Thankfully there are more options available to finance your business today than ever before.

Factor your accounts receivable

Waiting on customers to pay can have a significant impact on your cash flow. As your business grows, having sufficient cash to cover your immediate expenses is vital. If your capital is stuck in unpaid balances, you may want to consider ‘factoring’ as an option. This is essentially selling the outstanding balances to a factoring provider at a discount. The factoring company will assume any necessary collections and default risk, and you will free up your cash flow to reinvest in the business. You will typically receive 70-90% of the outstanding balance. This marginal loss may be worth it if you need the money now.

Consider a Small Business Administration Loan

I’m sure you’re familiar with conventional bank loans, but you may have been deterred by the stringent requirements. Did you know that many banks have loans specifically designed for small business financing? ­­These Small Business Administration (SBA) loans are designed with a different set of requirements. The SBA is a US government agency designed to help entrepreneurs and small business owners meet their financial goals. An SBA loan may be just the thing to kick-start your growing business. Contact a Valley SBA consultant to walk you through the lending process and find out if a SBA loan is right for you.

Take advantage of low rate credit cards

Introductory rates on business credit cards are rather generous, many times offering interest-free financing from twelve to fifteen months. If your business needs new equipment, inventory, etc., this is a viable option. Of course, you want to be certain you have your financial projections in order. Be sure you will be able to comfortably pay the balance in full before the introductory period ends. If not, you could owe thousands of dollars in interest.

Try crowdfunding

With the rise of the internet, crowdfunding has become increasingly more popular. With crowdfunding you can finance a new venture by collecting small amounts of money from lots of people, thus splitting up the burden. It’s a viable option for many startups. Take time to learn about the process because this option could mean putting your business strategy on the internet or giving up equity. In either case, effective management can make the benefits outweigh the risks.

Practice safe borrowing

There are many options to help you finance your business growth, but they are not all created equally. Before you make your final decision, make sure you understand who the lender is. You are forming a partnership that should not to be taken lightly. You want money from lenders who have a good track record and will be around in the future. The best lenders protect their borrowers, are transparent about the process, and always comply with regulations.