In the run-up to launching a business, working out your financing options is fairly straightforward. However, after it is up and running, you have even more variety available when it comes to securing further cash injections.
To bring you up to speed, here is just a selection of solutions for financing a business that already has a track record of generating revenues and serving customers successfully.
Revenue Based Financing
The popularity of revenue based financing is rising, and for good reason. It’s a method that allows businesses to grow and prosper, without resorting to equity dilution on the part of the founders.
In essence, you are able to upfront your revenue based on past performance and future projections. So rather than waiting for earnings to roll in further down the line, and being hampered in reinvesting this in expanding your operations, you can access the capital immediately.
Revenue based financing can also be flexible and scalable, so that as your organization blossoms, so too will the funding capacity that’s available to you.
Just as a standard bank account customer can activate an overdraft that gives them extra wiggle room if their funds run low during a given month, so too a business bank customer can implement a similar facility designed to smooth out potential cash flow hiccups.
As with any overdraft facility, there will be interest to pay on any business-based arrangement. The major upside to this is that the funding is always there, available on-tap. It could give you that peace of mind you need, since minor emergencies can be averted through the use of a business overdraft.
Lots of businesses, from startups to major corporations, turn to crowdfunding in order to generate capital without taking traditional routes.
With crowdfunding, there are lots of options regarding how you run your campaign. For example, if your business is underway and you want to launch a new product, you could use crowdfunding to essentially pre-sell it to prospective customers, publicizing the benefits and features while offering perks and incentives at different levels.
This is also advantageous because it means you can test the waters and see if there is demand for a product or service based on the amount of interest your campaign receives. It could help you avoid a misstep, or reveal an untapped niche.
Another option for tapping into the potential of your business and unlocking cash in the process is asset financing.
As the name suggests, it lets you receive financing against the value of any assets that are owned by the organization. This usually takes the form of a piece of equipment or machinery which has value locked up in it, and which may be the key to help your business grow to the next level.
Usually the amount of finance available is capped based on a percentage of the value of the asset, so you need to have a realistic idea of what an asset is worth to avoid disappointment and to get a good deal.
Following on from the discussion of crowdfunding, P2P funding follows a very similar model, except in this case it is a far more business-focused arrangement, rather than one which can be opened out to anyone who feels the desire to contribute.
Funders may be looking for a return on their investment, although in this case they will not own any equity in your organization, which is positive if you want to retain control.
Clearly your choice of business financing must reflect your needs and what you’re comfortable with, so cover all the angles before deciding.