Any organization that is persistently successful in business will eventually need to expand. A business that cannot meet their increased demand for services or goods will eventually start to lose money and decline. The expansion is just a necessary part of the business process for successful people. If you are a business owner or manager and you want to know how to expand your organization, keep reading the following material. It will present 6 funding solutions that will grow your business and increase your profits.
Most businesses that want to expand typically rely on loans from a bank to get ahead. Loans are important because they provide the funding that an enterprise will need to expand. Your business must have a sound business plan, have good credit, be an ethical operation and show profitability before a bank or lending institution will invest.
Entrepreneur online magazine lists different types of loans that are available for funding. These include- a line of credit loans, instalment loans, balloon loans, interim loans, secure loans, letter of credit, unsecured loans, SBA loans, 504 loans (for assets) and the 7(m) Microloan program. There are many other types of loans available for financing but these particular types are among the most commonly available for most businesses.
Angel Investors and Venture Capitalists
Angel investors and venture capitalists can help you to get funding through investments. An angel investor is a person who invests their own finances to help support a business owner’s expansion. Angel investors can be people that you know or they can be people that you never met before in your life. Many angel investors are entrepreneurs and quite a few are professional people who have extra funds to invest. Angel investors will typically invest their money into a business if they support the product or service that is being offered. Angel investors will also stand behind an organization that is beneficial to the community or to their line of work. These individuals help businesses to expand and to grow when traditional funding is limited or not available.
Venture capitalists tend to deal directly with an investment company that acts as a middleman for their money. Venture capitalists will provide investors with the information they need to invest in a business. A venture capitalist will make a decision based on the information provided. Just remember that a venture capitalist and an angel investor invest their money within a business in two different ways.
Initial Public Offering
If you are a business that is expanding extremely fast then you might want to consider an initial public offering or IPO. An IPO might be a bit extreme for most businesses but for some organizations that are really growing fast, this might be the best thing to do. If a product or service is marketable enough it can immediately cause a company to rapidly expand. Becoming an IPO is not an easy task and you must have your operation functioning at full capacity. There are many regulations and rules for a business to become an IPO and if your company does not meet these conditions, it will not gain this status. This type of expansion should only be considered if your company has a proven product or service that will be a big hit with the masses.
Crowdfunding and Crowdsourcing
Crowdfunding and crowdsourcing are two other ways that you can raise money for the purpose of expansion. Business Insider online journal recommends crowdfunding and crowdsourcing for your organization to raise capital for expansion. This approach involves receiving money through crowdfunding and sourcing websites or organizations that offer this service. By the way, crowdfunding is a funding process that utilizes many people to raise a large amount of capital. Crowdsourcing uses the same concept as crowdfunding, but it also includes hiring people out to help a business to raise money.
Invoice Financing as an Option
Invoice financing is a process that involves utilizing assets for product lending. This expansion method will allow an enterprise to finance their accounts receivable through a slow paying process. A factoring company buys the invoices from the selling organization and the selling organization receives an immediate payment. Receivables can also be used to secure a revolving line of credit. In other words, as long as your business is selling its products or services, the invoices that you are receiving for sales will be immediately given to an organization that is providing you with financial support. For an instance, selective invoice finance is a great expansion tactic that you can incorporate for your business.
Bootstrapping: Using Personal Funds and Personal Savings
You might be able to fund your outfit with own personal finances. This method is not recommended for everyone since people must have enough money to support their lifestyle. However, if you do have a lot of money at your disposal then you should take this route. This method could quite possibly be the best thing to do. Self-funding (also called bootstrapping) is a great way for you to expand because you will not have to pay anyone back for borrowing money for this cause.