An unexpected challenge of running a successful business is the art of finding capital as the company grows. Many business owners focus their funding efforts exclusively on the startup period of the first year when the company needs money from investors, loans, or owner capital, but they may neglect to consider later needs of company finances once the business is running.
Finding funding solutions for a business that is experiencing rapid growth can be a challenge. Depending on the type of business, the record of success in the industry and management team strength and the needs for growth, finding money to keep a business thriving is a very achievable goal for most businesses.
One of the most common funding sources is in the form of a traditional bank loan. Based on the strength of the company’s past performance, its assets available in the form of equity in land or equipment that can be offered as security, and other variables, finding loans for most companies is possible.
One critical consideration to bear in mind when weighing funding options, though, is the long-term cost of borrowed capital. If the needs are immediate and short-term, such as increased payroll expenses during the busy season, then long-term finance such as a loan with the company tied into years of payments and interest does not usually make good business sense.
Many financial institutions today offer a wide variety of loan options, though, so that it is possible to work with the lender to craft terms and conditions for borrowed money that may make sense in the overall cash flow equation for the company.
Many private capital firms appreciate the value of investing in a successful business to help spur growth. Depending on the company’s track record, its management team and customer base, and the project that is planned, often individuals with money to invest will take an equity (ownership) share in return for an influx of capital into the company. Without taking on more debt and long-term payment obligations, the company is able to grow as needed.
If a business has a lot of expensive tools, equipment, or even substantial valuable inventory, it is possible to leverage the value of those things into working capital. Many finance companies will provide needed funds with the security of the equipment or assets, allowing the company freedom to access capital without sacrificing debt rating and incurring interest typical of bank loan financing.
A successful business that has accounts receivable on the books, which is money that customers owe for goods or services already purchased, can use those accounts to secure money. Financing companies will purchase the accounts at a discount.
The benefit to the company that generated the accounts is the access to ready capital that can be spent on any business needs. As the money is not a loan, there is no interest nor ongoing monthly payments that can act as a drain on future growth.
Solutions for Every Need
While most business owners are not financial or investment experts, there are resources available for any company to work with skilled experts to craft a funding plan that will allow for growth and ongoing costs of business without creating an excessive debt burden.
Working with financial professionals who have knowledge of the particular industry and its funding needs can give the company leaders the peace of mind they need to focus on doing what they do best, which is running the company successfully and producing needed products and services
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