Growing companies often need to free up company cash or find new sources of financing to build products, introduce services and launch marketing campaigns. Because your company is growing, you have a variety of financing sources. According to the National Small Business Association’s Mid-Year Economic Report in 2017, 64% of small business owners used bank loans for funding while 11% used private loans with friends and family. Thus, you might tap government loans and grants, angel investors, and crowdfunding – funding available to newer companies. Or you might access the same financing sources mature companies do. These include venture capital, joint ventures and taking a company public.
As your company grows, its need for cash may also increase. Finance sources you might have tapped as a startup company are usually still available to you. Your company may qualify for loans from the Small Business Administration and your needs may fit crowdfunders. Angel investors are potentially more interested now than before, because you have a history to show and they have a clearer picture of your firm’s future growth.
Factoring is a finance method that lets you quickly access cash you’re owed by customers. A factoring company agrees to buy your account receivables at a discount and service them for a preset term. Slightly more expensive than a bank’s interest rate on a loan, factoring puts money from your accounts onto your ledger in days. Most accounts receivables, in contrast, pay within 30 to 60 days.
Emerging small businesses exchange the challenges of a startup for those of a growing company. Whether your company is considering a new building, hiring new employees or creating new products, it will likely need as much cash as it can find. Leasing capital equipment can keep your company’s cash flowing. This process may save companies money in the short term, but costs more over the long haul.
What happens if you like the idea of leasing, but your company owns its equipment? Sell your equipment to a company specializing in sale-leasebacks and lease it back from the firm. In the short term, this financing technique can save you money versus loans you may have had on your equipment. It can, however, cost more over the term of your lease.
Whether you want to cash in on your company’s success or take it to another level, there are ways your business can access large chunks of cash. Joint ventures and venture capital infusions are financing options that exchange cash and expertise for a stake in your company. An initial public offering also brings new investors and potentially the most money to your company. It is, however, costly and time-consuming to achieve. Depending on the investment made, any of these techniques can result in your becoming a minority stakeholder, as new investors crowd you out.