As a business owner, setting up or starting your own business is exciting. Seeing your business flourish is a rewarding experience, but often leads business owners to a bit of a crossroads.
This leaves them asking the question – what’s next?
It’s common to want to know how to grow your business but struggle with knowing where to start and how to obtain finance to do so.
If you’re a business owner seeking advice on how to grow your business, we’re here to help. Read on for our expert advice on fast-tracking your business growth and the ways in which you can achieve this.
Financing business growth
When it comes to financing business growth, there are plenty of options available for business owners.
Organic growth sees your company expanding through its own operations by utilising internal resources and reinvesting business profits to fund growth.
This could mean making production more efficient, meaning you can produce more within a shorter time frame, leading to increased sales.
The main benefit of organic growth is that it relies on self-sufficiency and avoids taking on debt.
Raising capital to finance business growth
When it comes to financing business growth and raising capital, there are a few methods businesses can opt for.
Debt capital is where businesses borrow money and agree to pay it back to a lender by a certain date.
Your company may choose to opt for finance initiatives to aid long-term growth. This might be applying for a loan to pre-purchase a large quantity of stock, fund machinery or access new software.
Some of the most common ways to do this include:
Business loans are fantastic options for businesses looking to grow, as they can be used for a number of things.
You may have the opportunity to acquire the premises from where you operate your business or need finance to purchase a competitor’s business.
Perhaps there’s a sudden increase in demand for a particular product that you need funds for to purchase in bulk, or you’re looking to expand your business through the latest software. Whatever it may be, a business loan can likely help.
These loans are often secured by residential or commercial property, but unsecured options are beginning to appear.
However, lenders want to see where your money is going, and both secured and unsecured lending will require the business to meet certain turnover and profitability criteria.
To learn more, head to our blog on business loans.
An overdraft is essentially a line of credit attached to your business bank account, which allows your business to draw on money (up to an approved limit) beyond what you currently have in your account.
You’ll then only be required to pay interest on the amount you’ve ‘overdrawn’, making it a useful cash flow solution in many situations like purchasing stock or equipment, paying staff, or even covering general expenses.
There are secured and unsecured business overdrafts, so talking with a finance professional will help you figure out which is best for you.
To learn more, read our blog on business overdrafts.
Business credit card
Another option businesses can use to raise money via debt capital is a business credit card. Essentially a ‘buy now pay later’ option, a business credit card allows you to purchase up to your credit limit and pay it off later.
Different lenders offer different benefits and opportunities, so it’s important to chat with a lender about which credit card works best for you.
The second way businesses can grow is through equity capital. Equity capital is generated through the sales of shares of company stock rather than through borrowing.
This is a good option if it’s not financially viable for a company to take on more debt but they want to raise capital.
It generally comes in the form of cash in exchange for company ownership, usually through stocks.
Having investors contribute to growing your company is a great strategy if you can get them on board. Investors won’t demand a monthly payment because their involvement isn’t a loan.
Aside from the financial aspect, investors can be a reliable source of business advice and may be able to put you in touch with a network of people you can draw on.
However, investment isn’t ‘free money’, so if this is a route you’re considering, talking to a finance advisor will help to put you on the right track.
If equity capital sounds like the better option for your business, get in touch with our team of experts today.
How to grow your business
Growing your business can feel overwhelming; however, the Inovayt team are equipped to help you through a range of growth scenarios.
Some of the most common ones we see include:
- Businesses wanting to pre-purchase large quantities of stock due to market demand.
- Businesses wanting to purchase large or costly machinery that will help their business profit in the long term.
- Businesses wanting to purchase new software to aid both internal and external processes. This might be speeding up a time and money-consuming process.
- Businesses wanting to hire new staff members to grow.
In business, cash flow is like oxygen – you can’t survive without it.
Businesses need to ensure that they have at least three months’ worth of wages, utilities and costs saved in the bank before they can get a loan for more immediate costs.
Not having reserves in the bank is a dangerous position to put your business in, should something happen.
With technology consistently changing and evolving and the business market becoming more competitive, your business needs to adapt to changes or risk falling behind in the market.
Investing in your business will allow it to grow, whether it’s by debt capital or equity capital.