At some point, this will likely require additional funding to cover expenses and accelerate growth. Most small business owners are constantly looking for ways to improve their business growth.
The first step is to make sure you have put together a strategic growth plan. Develop a strategic growth plan using your business plan.
Focus on the strategies you need to implement and milestones you need to hit to grow your business. A financial forecast will ensure that you understand how much money you need to fund your growth, based on your projections.
What are the key methods for funding your business?
Identify which funding method you intend to explore. More likely, you’ll be leveraging multiple funding methods but your decision depends on how much funding you need, the level of risk you’re willing to take, and how accessible funding options are for your business. Here are a few common options worth exploring.
Finance your business with your funds, through your savings, personal loans, business loans, or with credit cards. When you bootstrap, you retain complete control and ownership over your business.
Bootstrapping also means that you will need to start producing revenue for your business as quickly as possible to continue to fund the business on your own.
2. Bank loans
A bank loan provides short or long-term finance. The bank offers loans for a fixed period for a particular rate of interest. In addition to your business plan, the bank will require collateral security for the loan. However, in the case of a startup, this security often comes in the form of personal guarantees provided by the entrepreneur.
3. Get Funding From Business Incubators & Accelerators:
There are few fundamental differences between the two terms. Incubators are like a parent to a child, who nurture the business providing shelter tools and training and network to a business. Accelerators do more or less the same thing, but an incubator helps/assists/nurtures a business to walk, while an accelerator helps to run/take a giant leap.
Early-stage businesses can consider incubator and accelerator programs as a funding option. These programs assist hundreds of startup businesses every year.
4. Friends and family financing
There is nothing worse than family and friends fighting regarding money and business. But keep in mind, taking money from friends and family can be tricky and emotional.
Provide your family with the strategic growth plan of your business plan, so that they can see that you are being thoughtful about your growth can be a great first step. The money can be in the form of a loan, or exchange for equity.
Also Read: How to Pitch Your Business to Your Community, Friends and Family
Crowdfunding is when you ask a crowd of people to donate a defined amount of money for your project. The three general categories crowdfunding can fall under are equity, donation, and debt.
6. Angel investors
Angel investors are affluent individuals who provide capital for startups. These investors are looking for companies that they can invest in, as a way to get a return on their investment. Angel investors intend to turn the debt into equity at a later date or ownership equity or ownership of assets.
If you do not have an exit strategy for your business, angel investors may not be your best route. If you plan to grow your business and sell it, acquire more businesses, or even potentially go big and IPO, then angel investors might be right for you. But if you plan to grow your business, own it, and run it forever, you may want to think twice about approaching angel investors.
7. Venture capitalists
A venture capitalist, VC are people who invest in business ventures by providing capital for either startup or expansion. VCs are looking for a higher rate of return than would be given by more traditional investments. You need to plan a very high growth strategy to even think about bringing in VCs.
8. Business Bank Loans:
Banks are the first place that entrepreneurs go when thinking about funding. Business loan from the bank would involve the usual process of sharing the business plan and the valuation details, along with the project report, based on which the loan is sanctioned.
The bank provides two kinds of financing for businesses. One is a working capital loan, and the other is funding. Working Capital loan is the loan required to run one complete cycle of revenue-generating operations.
Almost every bank in India offers SME finance through various programs. For instance, leading Indian banks – SBI, Andhra Bank, PNB, HDFC, ICICI, Indian bank and Axis banks have more than 7-8 different options to offer collateral-free business loans.
9. Microfinance Providers or NBFCs
NBFCs are Non-Banking Financial Corporations are corporations that provide Banking services without meeting the legal requirement/definition of a bank.
Microfinance is the access of financial services to those who would not have access to conventional banking services. It is increasingly becoming popular for those whose requirements are limited and credit ratings not favored by the bank.
10. Govt Programs That Offer Startup Capital:
Government-backed ‘Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA)‘ starts to extend benefits to around 10 lakhs SMEs. You are supposed to submit your business plan and once approved, the loan gets sanctioned. You get a MUDRA Card, which is like a credit card, which you can use to purchase raw materials, other expenses, etc.
Also Know: How to Apply MUDRA Loan?
Also, different states have come up with different programs like Kerala State Self Entrepreneur Development Mission (KSSEDM), Maharashtra Centre for Entrepreneurship Development, Rajasthan Startup Fest, etc to encourage small businesses.
SIDBI – Small Industries Development Bank Of India also offers business loans to the MSME sector.
The Indian government has also announced the Atmanirbhar Bharat package to fight the covid-19 situation.
If you want to grow fast, you probably need outside sources of capital. If you bootstrap and remain without external funding for too long, you may be unable to take advantage of market opportunities.