If you’re a small business that is strapped for cash and/or business growth has stagnated, then there are two primary options available to you: acquire a loan or issue equity. Generally, the former is more desirable as it lets you maintain control of business decisions. The following are just a few examples of the avenues that are available for obtaining growth capital competitively.
The Equity Route – Venture Capital
There are some cases in which the issuance of equity is a superior method of obtaining growth capital than the acquisition of loans. For example, venture capital firms exist to help their members invest in promising businesses; the recompense for their investment is equity in your growing business. Since you needn’t concern yourself with monthly or quarterly interest payments, you have cash flow available to pour into the business. Their equity stake, obviously, grows with your business.
Traditional Debt: Borrowing
Of course, the tried-and-true method of taking on debt is always an option; you can try banks, lending institutions and credit unions. The clear advantage here is that you don’t have to give up ownership stake in your business; but you do have to pay interest, and you may even lose assets if the debt cannot otherwise be repaid. It is very important to have an optimal credit score so that the loan repayments aren’t a barrier to future business success.
Use Your Own Money
This is probably the most common method used by successful businesses. Although rare overall, it gets you off to a great start since you don’t have to give up equity or take on debt and interest payments. It requires a lot of pre-planning, of course. It may even help you obtain outside investors more easily, since using your owner investment raises confidence in the soundness of the business plan.
Another option is tied to the above: angel investors. These are wealthy individuals who are looking for startups in which to invest. As mentioned, if owner investment is your primary means of capital in the beginning, it may be much easier to pique the interest of angel investors. Crowdfunding is similar, and can be best be done via the online space.