Tips for Growing Your Business With Financing

Many small business owners find themselves in a tough spot when they need the funds to grow their company, but they don't want to give up any control or equity. You can scale your company without giving up ownership with financing and creative thinking. Here are tips for growing your business with financing.

You Can Sell Equity without Giving it Away

Many small business owners avoid financing because they don't want to give up equity. The alternative is to sell an asset like accounts receivable, inventory, or intellectual property. This will still give you the capital you need while keeping ownership for yourself.

Find Solutions Outside of Loans

Loans are always available but sometimes not the right fit. Consider all your options before applying for a loan. A line of credit with monthly draw limits can be flexible and work around cash flow needs. Another option is factoring, where invoices are sold at a discount in exchange for immediate payment, then resold to factor who collects on the invoice and adds a fee.

Have a Plan for Repayment

There are many creative ways to structure repayment terms, but whatever option you choose should be managed carefully and documented thoroughly. SBA loans typically come with standard seven-year repayment terms, while other lenders may offer 20 years or more. You can also structure an interest rate pegged to the prime rate instead of fixed, which provides flexibility over time as prime fluctuates.

Consider a Partner

Sometimes, you may need an extra hand to launch new products or services. Consider a partner who has the skills and expertise you don't have in the house but doesn't want to be paid with equity or money. If set up properly, they can even provide tax benefits if their contributions aren't compensated for at the end of the year.

Keep Your Cash Going Once You Get It

Once you apply for financing and it’s approved, keep an eye on your finances and track where the money goes and your rate of spending. This is not a time to relax on spending, but rather focus even more on business operations and efficiencies, so your cash keeps going longer than anticipated.

An LTV mortgage with a 15-year repayment plan can help your company stay cash solvent for many years to come and ensure that your business is maximizing profit, according to NelsonFunding, an expert in Utah business warehouse loans. Stay organized by creating a cash flow projection and tracking your actual results against it. Financing your business expenses and expansion can either make or break your business, so treat it responsibly.

Be Prepared for a Downturn

If you have a company with a healthy balance sheet and income statements, be prepared to weather the storm if an economic downturn hits. The cash flow from your financing should help you through those leaner times until business improves.

Leverage Your Credit

Most businesses don't have great credit scores, but that doesn't mean they can't borrow money successfully. If you don't have perfect credit yourself, leverage someone who does – like your parents or a business partner– to cosign on a loan. Be sure to check their credit score first, though, as it may affect your ability to get a loan.

Don’t Overlook Grants

Many resources are available to help small businesses grow, many of which come in grants instead of loans or equity investments. Some examples include government programs like SBA (www.sba.gov), local/state business development centers (www.usbdc.org), and even universities that have been known to provide research grants to well-qualified companies that can leverage them into successful proofs-of-concept that become a source of funding for growth later on.

Create a Business Plan

Even if you're not looking for financing right now, create a business plan to sell your company at some point. This will force you to focus on growing and simplifying your organization into something that can be leveraged by an investor or other interested party.

Consider Bootstrapping

Bootstrapping means funding growth out of profits by reinvesting every dollar back into the company instead of buying new equipment or hiring staff like many entrepreneurs do when they get their initial capital infusion.

Getting financing for your small business can be a daunting task, but it can be a successful process with careful planning and execution. By following the tips above, you'll be on your way to securing the financing you need to grow your company.

Growing your business should be your number one goal. However, maintaining the business, you already have is just as important, especially if it means making sure loans are repaid on time and without difficulty. Don't let an unexpected hiccup in your company's cash flow prevent you from meeting necessary obligations.