≡ Menu

How to Finance a Growing Business in 7 Easy Steps

Do you have a growing business that has become more financially demanding? Here’s how you can finance your business in just a few easy steps.

Having an incredible business idea and allocating the funds to make sure it succeeds are two completely different things. It’s not enough to have passion and vision if you can’t create sustainable business practices within your company.

You need to be able to make ends meet every step of the way in order to have long-term success. That means your first priority as a growing business is to figure out your funding strategy.

There are many different ways to get money coming in and to make sure you spend it wisely. If you’re not sure what the best option for you is, just follow the steps below. Here are 7 things you can do to finance a growing business.

1. Create a Financial Plan

The first thing you need to do is assess your funding needs. Think about everything that you need more money to do and prioritize what the most important tasks are.

You may be more focused on hiring new people right now than doing product research. Or, you may need to heavily invest in product development before you can start to think about expanding your office space or rolling out a new marketing campaign.

Every expense adds up. You need to have a crystal clear definition of where all your money is going right now and how much funding you need to fill in the blanks.

2. Understand All Your Options

No matter how much money you need, keep in mind there are various ways to allocate funding. Some business owners think the best way to get more funding is to take out a small business loan. Others are a little more resourceful and look into things like peer-to-peer lending or making budget cuts.

Whatever you do, keep in mind there’s more than one way of doing things.

Just when you think you’ve found the funding solution you’ve been looking for, take the time to do a little more research. You never know what you can come up with when you have every alternative laid out in front of you.

3. Try Crowdfunding

Speaking of alternative funding options, have you considered crowdfunding yet?

Crowdfunding is kind of like asking friends and family to invest in your business but in a more casual manner. Instead of talking to mom and dad about supporting your entire business, crowdfunding gives you the chance to gather small donations from multiple people.

It takes pressure off your loved ones to give you a huge sum of money and take a gamble on your business, while still offering them a way to support you. Your friends and family are sure to feel more comfortable giving you something like $20, $50, or even $500 to support your business rather than giving you a big loan.

Crowdfunding is even more successful if you make it personal.

Be sure to state your company’s mission statement and write personal thank-you’s to people when campaigning for funding online. If you really want this to do well for your business, consider hosting a fundraiser to bring people together and show them what your vision is all about.

4. Reach Out to Potential Investors

The next option available to you is angel investing. This is when one or two savvy business people see something they believe in and give entrepreneurs the funding they need to succeed.

Angel investors tend to be hands-on throughout the funding process. They’re not just going to give you a lump sum and let you do your thing. Many will often negotiate partial ownership or a piece of sales for a certain period of time as part of their return.

More so, they’ll go beyond the financial commitment and act a mentor to you.

Remember, the only reason they’re giving you money in the first place is that they see a strong opportunity for success. When angel investors offer you their time and insight in addition to their funds, take it.

5. Sit Down with Your Suppliers

The thing about negotiating with investors is that you need them more than they need you. They typically have the upper hand when establishing the terms of your agreement.

Your relationship with suppliers is much different, though.

You need them to grow your business and they need you to keep their cash flows on the rise. There’s a bit of dependency on both sides, which means you have an opportunity to create a better agreement for you and them.

Typically, this is done by changing the ways you finance a big purchase. Talk to some of your vendors and see if they’re willing to sell you something as a loan. This means you’d pay off your investment over time instead of having to spend all the money at once, which leaves you with more funding.

6. Take a Look at Your Cash Flows

No matter what kind of funding seems most beneficial to your business, double check your cash flows before you finalize any agreements. You need to have a clear understanding of how all your money is coming and going.

This may even lead you to another funding opportunity.

What if you could have more of your accounts receivable paid by customers at the beginning of the month instead of the end? What if you could spread out your accounts receivable payments throughout each month so that you always had money coming in?

These changes can completely transform the way all your cash flows work. They may be the difference you need right now to keep up with all your growth and new investments.

Also, remember that cash flows could be subject to change for reasons outside of your control. You can learn more here about different scenarios your business may end up in that you need to be prepared for.

7. Consider Pledging Future Earnings

The final way to allocate funding for your growing business is to pledge future earnings. This may come up in your negotiations with investors, but it’s also something you can offer new employees.

Pledging future earnings gives you an opportunity to bring people on with lower salaries, but in a way that they still feel valued and well-compensated. You can offer things like company stock or even partial ownership in the company to offset the low wages you’re able to offer right now.

Keep in mind that your wages should still be reasonable, though.

Make Sure Your Growing Business Stays on the Right Track

Proper funding is just one need that a growing business has. In addition to getting all your numbers in order, you also have to focus on building a strong company culture and making sure all of your operations are fully-efficient.

It’s worth looking into everything from how you build leads to fulfill orders. You also need to focus on keeping employee retention high and increase brand awareness, too.

With so much to do, it’s easy to get a little overwhelmed. But remember, there is an answer for all of your business needs and a way to handle every problem that arises.

For more entrepreneurial insights to help you manage everything that comes your way, click here.