Last month we had a look at structuring a business for growth, this month we’re going to take a quick look at how a business goes about raising funds to help facilitate that growth.  Depending on how quickly a business is growing, capital from within the business may suffice in facilitating growth.  More often however, a business needs a source of cash from an external source to help accommodate the growth of the business.

The most obvious way to raise funds would be a business loan.  However as a business owner, you may be reluctant to take on the commitment of a loan during a period of uncertainty such as growth.  In addition, it may be difficult to convince a lender of the potential growth opportunities making borrowing either difficult or impossible.

So how then, can a business fund it’s growth where capital within the business is limited?

Equity Finance

In “accounting speak” for the most part, we’re talking about “equity funding”.  That is, funding provided to your business in return for an ownership share of your business.

There are several positives from this type of funding, such as:  not having any debt; it’s less risky than debt finance; business contacts improve and increase as a result of the relationship with the investors who want to see the business succeed; further funding possibilities as the business grows.

On the flip side, there are negatives including:  sharing ownership with investors; the need for time and money to make the business more attractive to investors; the need for time and money to research the right investors; and the potential negative consequences if the business fails.

So where can we go for this illusive funding:

Crowdfunding

This is a relatively new way with which to raise finance for a business.  However it involves raising finance from donations from the public.  It is usually achieved through a crowdfunding website and if people are interested in the business, they will make a donation to your cause.

If growth of your business centres around a new product, this is a great way to raise funds and potential client base for the product.

Government Grants and Assistance

Depending on your business, there may be assistance in the form of government grants.  Generally government grants are eligible to existing businesses rather than start-ups

So there we have it, a few ways to raise funds for a business when borrowing is unattractive.

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