One of the biggest impediments to the growth of a business is not having sufficient cash to support that growth. Growth typically means the business will require additional funds to cover everything from higher wages, increases in debtors and stock levels, additional plant and equipment, and a general increase in business overheads.
At VC3P, we receive many requests from worthy businesses looking to grow from where they are today.
These stages these businesses typically fall into are 1 of these broad categories:
- Just started trading, don’t yet have any customers or revenues – just an idea to exploit
- Recently started trading, have customers but limited revenues and certainly not profitable
- Trading for 12/more months, breakeven month-to-month but not yet recovered all their startup costs
- Trading for 12/more months, breakeven month-to-month and have recovered all their startup costs
- Trading for a number of years, and have plateaued on both revenue and earnings
- Trading for a number of years, continuing to grow but want to grow faster
There are essentially 8 ways for businesses to handle the funding to support their growth.
These 8 ways fall into either Debt or Equity categories:
- Boostrapping (fund it yourself, whether from your own pocket or from retained earnings)
- Friends and Family (issue equity in exchange for a small amount of funds)
- Crowdfunding (issue equity in exchange for a small amount of funds from strangers)
- Angel Investors
- Bank Loans and Line of Credit Facilities
- Venture Capital
- Private Equity
- Receivables Funding (including Factoring)
The type of finance you need to use (the 8 ways) to fund business growth in your business will depend on what business stage (the 6 categories) you’re at. As with any form of financing, it is important to match the finance facility with the purpose, to ensure that it does the job you intended it to do.
Working from the premise that the funding is to support growth in customers, and the consequential growth in staffing/wages/contractors, we can start to work our way towards the best types of funding for your circumstances.