When you’re working on growing your business, there are many different strategies you can follow, such as focusing more on sales and on customer service; testing new marketing avenues and product lines; and hiring contractors or staff members to help you complete tasks more quickly.
However, sometimes it’s just not possible to grow your business unless you get access to more funds. If you’ve never had to approach financial institutions for this kind of assistance though, the process can be rather daunting and stressful. To help you on your way, read on for some tips you can follow to find the best kind of financing for you, in the shortest timeframe.
Types of Financing to Consider
If you’re looking not just for some cash to help you expand your venture, but also support along the way, investigate whether there are any business incubators in your area to join. These spots are excellent for providing things like free or discounted office space, mentoring, and assistance from specialized advisors.
Alternatively, consider searching for someone to become your partner in the business. They could invest funds, time, and energy to help you take your organization to the next level. Make sure you find someone who has complimentary skills to you if you go down this path. Similarly, you might be interested in finding an investor, a venture capitalist, to get involved in your firm. These people put in money in exchange for an ownership stake, and typically are there for advice and support as well.
If you’re like most entrepreneurs though, your first stop for business financing will probably be a bank or other lender who can provide you with cash as part of a short-term or long-term loan. While you might want to try out your local bank or the financial institution you currently have accounts with, keep in mind that these days there are all sorts of other lending organizations to choose from.
For example, online lenders are great options now for working capital. These business often have cheaper rates because they don’t have the trading costs involved with street frontage and related expenses that other lenders do. They also tend to have shorter turnaround times for loan applications, and are often more open to dealing with newer, less experienced business owners with little trading history or minimal assets to use as capital.
If your business mostly operates by way of billing customers and giving them weeks or months to pay invoices, you may simply need to get access to invoice factoring to fund your growth-based activities. Invoice factoring firms are specialists who “buy” unpaid invoices from businesses. They usually provide their clients with around 80 percent of the value of invoices up front, and then pass on the remainder of the bill value, less their fee, once the original customers have settled accounts.
Some other financing options to consider are equipment financing, where you lease expensive pieces of equipment rather than outlaying funds to buy them outright; and merchant cash advances, where companies advance you funds you later pay back via a percentage of your company’s daily sales (this option tends to be one of the more expensive choices though). Other ways to get access to cash are crowd funding; business grants from governments and private organizations; and start-up or business-plan competitions run by universities, private firms, and government departments.
How to Increase Your Chances of Financing Success
To increase your chances of financing success, be sure you choose the best funding option for your needs. Spend time researching so you can determine not only who is mostly likely to say yes to you, but also which one will provide you with the best terms – after all, you don’t want to grow your business only to find you can’t pay back loans or are otherwise significantly out of pocket because of the deal you got.
It’s also important to be clear on how you will use funds. Banks, grant programs, and investors, in particular, always want to know that provided cash will be used in a smart way by entrepreneurs. You should have a plan that details how the money will be used to specifically generate more sales and/or profit.
Lastly, improve your chances of getting access to additional finances bygetting paperwork in order before you start applying for funding. For example, you need to have the last three to five years’ worth of tax returns on hand (the business ones or, if you have a new venture, your personal returns), and you should have an up-to-date, detailed business plan. You’ll also need financial documents such as bank statements, revenue and profit projections, balance sheets, cash flow statements, credit reports, lists of inventory, and the like.