Four ways to fund your business

Starting a business is hard. Growing it can be even harder. Thankfully, there are plenty of different ways to access funds to help your business scale, from relatively low-cost options to ones with higher risks and returns. Find out more about four of the most effective funding solutions below.

1. Debt Finance

When people think about funding a business, debt financing is the most common type of financing that tends to spring to mind. Traditional bank loans and lines of credit, for example, are relatively simple ways to get cash into your business, though they are far from the only source of debt financing available. Peer-to-peer lending can also be an option, or if you just need funds for a specific purchase, equipment financing arrangements might be available. Before entering into any debt agreement, make sure that your business can handle the repayments, especially if dealing with variable interest rates.

2. Equity Finance

Broadly, equity financing involves selling ownership (equity) shares in your company to a third-party investor in return for funding. Common examples of equity financing include angel investors, as well as venture capitalists. Using equity financing can allow your business to obtain capital without acquiring any debt, and potentially give you access to your investor’s business insights and connections, which can really help scale your business and grow market presence.

There are, however, downsides: not only do you lose some ownership in your company, but you may also lose a degree of control when it comes to decision-making.

3. Crowdfunding

Made famous by sites such as Kickstarter, crowdfunding raises funds by having a large number of people contribute small amounts of money to your business. There are different types of crowdfunding—under rewards-based crowdfunding, a business typically offers a tangible piece of merchandise or a service in return for a person’s financial contribution.

Crowdfunding can be a way to generate funds relatively quickly, and doubles up as good marketing for your business’s product or service, but failure to reach a funding goal is highly visible, and it’s possible you may not reach that funding goal.

4. Self-Funding

In addition to the above funding options, keep in mind that it’s also perfectly acceptable for a business to self-fund its growth.

‘Bootstrapping’ effectively forgoes external investment and instead focuses on self-funding business growth through a combination of personal savings, business revenue, and careful cost management, which often results in more organic growth. While bootstrapping has its benefits, keep in mind it does have some downsides, such as greater personal financial risk if the business fails.

How should you fund your business?

The economic climate has never been tougher to grow a business. If you would like a deeper dive into the best funding options for you, book some time with our team – we’d be happy to help!