5 Ways To Raise Funds For Business Growth
You have big plans for the future of your business, whether you’re looking towards expansion, increased production, or simply want to raise some capital. Whatever your goals are, you need to have the money to back them up.
You can use two main avenues to raise funds for your business: borrowing money to be repaid later or selling shares in your company.
Options for borrowing money include:
- Bank loans
- Peer-to-peer funding
Options for selling shares in your company include:
- Angel investors
- Venture capital
The route you choose to go down will depend on several factors:
- The size of your company
- How much money you need
- Your growth plans
- How much control you want to keep
But what does each of these entail? And are there any limitations?
Borrowing from the bank
Most banks offer small business loans, typically between £1,000 and £50,000.
However, these loans can be challenging to get. You will need to be able to demonstrate that you are a good investment, and that you will be able to repay the amount you are borrowing. To prove this, you will need to have a watertight business plan that includes figures and financial forecasts, along with a clear strategy for how you will repay the money.
Small-scale investors are matched to small businesses that are looking for funding.
After completing an online application, you receive a loan from a pot of cash pooled by savers looking for a better return on their investment.
When repaying this loan, you will face similar terms as those offered by banks, with an interest rate agreed upfront.
Angel investors are typically high-net-worth individuals who tend to invest in exchange for a share of the business, so they have to believe in you and the business.
They are typically also successful businesspeople in their own right and may be able to offer you advice that can be as valuable as the money on offer.
If you need more money than you can get from angel investors (in excess of £1 million), the next step is to look at venture capital.
Due to the amount of money, venture capitalists often ask for a large percentage of the business to make the investment worthwhile for them.
Venture capital is highly competitive, so you will need an amazing business plan, an outstanding strategy, the best pitch of your life, and just a pinch of luck.
Crowdfunding might be the best option if you have a product or vision that ordinary people can get behind.
Put out a message that shows why you’re a good investment, and hopefully attract a large number of small-scale investors who each take a small stake in the business.
How do I know which one is right for me?
The best way to know which one is right for you is to see how they all fit into your long-term plans.
If you want to keep full control over your business, then loans may be the best way to go, but you have to consider the repayments, which may slow your growth.
If you want to avoid repayments and have quick growth, then investment might be the way to go. But you will have to share your growth with all your investors.
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