How do I fund my organization’s growth?

How do I fund my organization’s growth?

How do I fund my organization’s growth?

shutterstock_44530567

The ideal answer is that you fund growth from profits  you generate from the business. This means your business grows at the rate your business can self-fund. However, even businesses that are generating sufficient profits and cash flow to fund their growth can find themselves with timing differences between when they need to spend the cash on growth and when the funds are being received from sales transactions.

So, the real answer to this question is “it depends.” It depends on how much money you need, what your opportunities are, and what growth rate is sustainable (through operations and financially). Your options are a function of:

  • your current success (financial strength and customer pipeline)
  • your growth potential (new opportunities)
  • what you will spend the funds on (working capital, asset purchases, etc.)
  • the timing of funds generated from the new activity.

When you have a solid plan and actionable information for funding sources to make their decisions, then you can identify your options. The two broad categories are debt and equity.  Within theses categories are different options. Debt can take the form of short term or long term debt. It can be provided by banks or alternative lenders. Equity options include different classes of stock or ownership interests; immediate investment or milestone investments on achieving specific performance targets, and convertible debt (debt agreement that can be converted to stock ownership). Your options depend upon your answers to the following questions:

  • How much money do you need and for what purpose?
  • How good is your personal credit history?
  • What type of banking and other relationships do you already have?
  • What personal assets (and debt options) do you currently have?
  • How much risk (leverage/debt) are you willing to take on?
  • How much control of the business or how much ownership are you willing to give up (equity)?
  • What other sources of cash (income stream) do you have available to pay toward a loan (debt)?
  • What business assets will there be?
  • What is the timing on becoming cash flow positive in your business?

There are many factors that impact what options you have to fund your business. In addition to debt and equity options, you may also be able to pursue grants and other funding sources that are non-dilutive meaning they don’t have to be repaid and they don’t require you to give up ownership. For-profit organizations can often find grants to help develop innovative technology and new science. Non-profits can frequently find grants that are mission related. The first step to funding your business is to have a business plan that is well-thought out and has financial projections that are built logically from documented assumptions about customers, markets, pricing, and so on.

Read More FAQs
%d bloggers like this: