Business owners need funds to grow. Adding a service, product or program means investing in whatever it takes – materials, staff, space, marketing, etc. Most businesses don’t have extra funds piled up, waiting around to be spent!
So what options exist to fund business growth? Picking the best option depends on the circumstances, available resources, creditworthiness, and risk tolerance. How do you choose?
Start by considering these four funding options:
- Get a Line-of-Credit
Every business should have a line-of-credit, in addition to a business credit card. Get approval before you need the funds so you are ready to act when the time is right. No interest is charged until it is used, unlike a traditional loan. This option is attractive for business owners with a strong banking relationship and a good credit rating.
- Add a Partner or Investor
Involving a partner or investor could mean sharing ownership or decision making. With the right person and situation, it can be mutually beneficial. Adding a partner or investor requires a legal agreement that details each party’s responsibilities. It can also change tax reporting.
- Launch a Crowdfunding Campaign
Funding from a “crowd” does not involve giving up any ownership or control. Generally, successful campaigns are launched by those who know or have access to a large population of potential contributors. Avoid technology and compliance headaches by using a crowdfunding site vendor, who will charge a fee and/or a percentage of receipts.
- Tap your Personal Resources
Commingling business and personal finances is a bad idea. However, lending personal funds to your business could be a viable option, under the right circumstances. Treat it like any other business loan by documenting the details, charging interest, and setting up a payment schedule.
Business growth takes planning and funding. When it’s time to act on your plan, it’s crucial to have funds to invest. Having your funding options lined up and ready to go will help your business grow.