If you're planning on growing your business, one of the first few things you need to do is secure funding. Now, there are a few ways you can finance your business growth, and it's essential to figure out which option will work best for you. So, it's best to review each option carefully to make an informed decision.
1. Debt Financing
Debt financing basically means securing a loan from a financial institution. The amount you borrow will not be paid back all at once. Rather, the credit is stretched out over a duration of time, and you are expected to make monthly payments. These payments include both your principal and interest. This is your agreeable part of the deal, and the lender gets their funds back with interest.
Debt financing, however, is not all that magical or exciting. After all, borrowing money is never a good option. There are always risks involved, and there will always be someone who'll look to get more than they deserve. That is why you need to protect yourself by taking steps to minimise the associated risks.
Look at who you're considering to lend you the money. Your lender should be a financial institution that's well-established, has a good reputation, and is regulated by the government. The bottom line is you want to choose a lender with a good track record.
2. Equity Financing
Equity financing is one of the preferred ways to finance your business growth. This is, in essence, a form of investment. You offer a certain percentage of your company to your investors in exchange for funding. You need to decide what percentage of your company you're willing to give up. If you give up too much, then you risk losing control of the business you've built. On the other hand, if you don't give up enough, then you won't reap the benefits of being a thriving business.
Equity financing is only ideal if your company is doing well and is worth something to your investors. If your company is healthy, your investors will be able to make a return on their money through positive returns or through eventual sales of their shares.
Crowdfunding is a relatively new way to attract funding for your business. This method requires that you set up a funding campaign. You'll be required to create a website, write a brief story about your campaign, and provide some other details concerning your campaign. Once you've got your website up and running, you'll need to promote it to potential investors.
Crowdfunding platforms such as Gofundraise or Equitise will make available some of the tools you need to get your campaign going. They'll also offer great advice on how to attract investors and make a good case for the return on investment your business can bring to the investors.
The Bottom Line
In the end, you'll have to determine which type of financing works best for your business. As much as you want to maximise your return on investment, you also want to keep in mind the risks of borrowing or giving up equity. The last thing you want to do is compromise your business or lose control over it because you're not careful enough.
Finance your business growth with the help of Wealthy You. We are an Australian mortgage company that provides alternative business funding in Sydney. We can offer you a variety of mortgage solutions to meet your specific financial needs. Apply now!