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  • Find New Sources of Money to Finance Your Growing Business

    Game Plan

    In-Depth

    Take Past Financing Techniques to the Next Level

    Your company is established and growing, but you can still tap financing sources used during your startup days. These sources include loans and grants, angel investors and crowdfunding. Read this for more information about them. Your company’s track record also gives you access to new sources of financing.

    Why would your emerging company need cash when it’s successful? Maybe you’re manufacturing a new product, expanding into new territories or launching a marketing initiative. These activities can cost from hundreds of thousands to millions of dollars.

    Here’s a closer look at how some financing methods can benefit your growing business.

    Loans and Grants
    The Small Business Administration guarantees a variety of small business loans. To qualify for the biggest program, called 7(a) loans, you must meet the agency’s definition of a small business and other requirements. Small businesses can borrow up to $5 million with this type of loan.

    The SBA guarantees special purpose loans for small businesses in rural and economically disadvantaged areas. State and local governments also have programs you might explore. In most cases, you will need to provide collateral to back your loan.

    Grants, on the other hand, typically don’t require collateral, but they are usually small. Local and state organizations offer from a few hundred to a few thousand dollars in grants for minority owned-firms. They also seek companies willing to locate in disadvantaged areas and to run environmentally sensitive businesses.

    One place you might find large grants is through the federal government. Uncle Sam’s various agencies offer awards that sometimes reach seven figures. A check of small business grants at www.grants.gov will show opportunities for firms in health-related fields, agriculture, technology and other industries.

    Angel Investors
    So Warren Buffet, the world’s most famous angel investor, isn’t interested in your company. Others are. Wealthy individuals look to invest in stable, established companies demonstrating a pattern of sustainable growth and continued potential. Entities—as opposed to people—and affluent individuals who exceed certain amounts of income and net worth must be accredited by the Securities and Exchange Commission (SEC).

    Choose the right angel and you should acquire valuable business acumen and advice as part of the package. Your tradeoff? Your angel will likely require a stake in your company. And the larger the cash infusion, the more equity you’ll need to trade.

    Crowdfunding
    Born as a way to solicit small amounts of money from many people, crowdfunding now includes larger projects and dollar contributions. Crowdfunders, big and small, are interested in innovative ideas and products. They seek long-term success. As with most financing techniques, this financing technique won’t get your company something for nothing.

    The majority of crowdfunders are still small, as is what they get in return for their investments. Perhaps they receive interest plus principal, a hot new product or VIP treatment, such as rubbing elbows with celebrity endorsers or dinner with company founders.

    Today, this concept has grown to include campaigns in the multi-millions of dollars. Because their potential audience may now include venture capitalists and angel investors, companies initiating larger campaigns often must offer equity in return.

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    Game Plan

    • The Small Business Administration guarantees different types of loans for growing companies. Learn more here.
    • If you’re willing to trade equity—and potentially control—for financing, you may be able to find an angel investor here.
    • To learn more about crowdfunding, check out Kickstarter and Indiegogo. They are two crowdfunding pioneers geared toward smaller projects. Crowdfunder is a new entry and includes much larger campaigns.
    • Look for expertise and experience in your industry to accompany bigger cash infusions by angels or venture capital firms.
    • If you’re interested in a federal government grant, visit grants.gov to learn if you’re eligible, find useful tips and register to apply.