Accessing Capital for Your Growing Business
Your business is growing. Great! But you know that to take the next step in your growth journey, you need more funding. What is the best way for you and your business to approach accessing capital? Read on to learn about the various sources of capital, how to secure it, and local resources that may help you.
Ways to Obtain Capital
You might know a couple of sources of capital off the top of your head. Bank loans and investors probably spring to mind immediately.
While those are the two traditional methods to gain access to capital, you should also look into several alternative funding sources. Crowdfunding, grants, loans from family or friends may be other options for you and your business.
What to Consider
Each source of capital has its benefits and challenges.
- A bank loan from a reputable institution has a lot going for it, like competitive interest rates and the freedom to use the money how you see fit. But you will probably need excellent personal credit and years of proven business success.
- Investors or venture capitalist funding won’t require monthly payments or even collateral. However, you will have to give up some equity in your business – and the expectations for fast growth can be high.
- Crowdfunding can allow anyone to help you grow your business, and you might get publicity from it, too. Be aware that some crowdfunding platforms have a time limit for campaigns and you may lose your proceeds if you haven’t raised your goal before the deadline. The platforms also charge a fee.
- Grants are basically “free money,” and receiving one can often lead to others. The downside: they’re competitive, time-consuming to apply for, and there are usually restrictions when it comes to how you can use the funds.
- Loans from loved ones may offer a lower interest rate and fewer hoops to jump through than a traditional bank loan. You will still need to consult with an attorney to draft a loan agreement, and there is always an inherent risk of the personal relationship when money is involved.
Where to Find Opportunities and How to Prepare for Them
Your next step depends on which route – or routes – you choose to take.
If you decide to go for a bank loan, start with your own bank or credit union. You’ve already established a relationship with someone there, so it stands to reason you’d have the best experience and receive the best guidance from your own financial institution. You’ll need to gather documents that explain what your business does, who owns it, and its financial health. These could include a business plan, social security numbers for all majority owners, tax returns, profit and loss statements, and financial projections. Your lender should inform you of everything that’s required, but it’s good to be prepared.
Finding an investor to help you scale your business will take more upfront research than seeking a bank loan, unless you happen to know some. Networking locally may be your best bet because you can establish a relationship with potential investors, and they are probably more likely to want to support a local business than an out-of-area venture capitalist would. You can also search online for angel investor groups and on LinkedIn but be sure to do your due diligence before going too far into pursuit of a partnership. Put together a pitch deck that you can present to potential investors that shows them a succinct version of your business plan, what products and services you provide (and what problems you solve), high-level financial projections, and how much funding you’re seeking.
Crowdfunding works best if you already have a strong following on social media. Experts also recommend lining up donations from family and friends before launching your campaign so that you achieve at least 30 percent of your goal in the first week. You also should have a specific reason for your campaign, such as expanding your storefront or offering a new product. Your marketing plan is crucial for raising capital this way. Tell your story in a passionate, professional, and concise way, and offer incentives to your donors to encourage participation (and perhaps some pride and loyalty).
Government entities, large corporations, foundations, and other organizations offer grants. Find opportunities through your circle of contacts and by searching for opportunities online. For federal funding options, visit Grants.gov. Once you’ve chosen one or more grants that seem to be a good fit for you, you might want to hire a grant writer to help you craft your application.
Loans from family and friends can seem like a good plan, especially if you’re just starting out. You still need to treat the entire transaction in a business-like manner. Be transparent about how much money you need, what you need it for, your business plan and finances, and when you expect to repay the loan. Once a verbal agreement has been established, enlist your business attorney to draft the written agreement.
Remember that you don’t have to rely on just one source of capital. In fact, diversifying may be your best bet. Grants and crowdfunding can raise money for specific efforts, while loans and investors can provide unrestricted funds. A financial consultant can help you determine the ideal approach to take.
Manatee County and the State of Florida have various programs and opportunities to help businesses expand by accessing capital. The following list contains a sampling of resources for entrepreneurs.
Bridge Angel Investors provides funding and mentoring for Florida-based entrepreneurs in an array of industries, from cyber security to education.
CareerSource Suncoast has several funding opportunities for business that want to train their current employees or recruit new employees.
Community Redevelopment Agencies in Bradenton and Palmetto have grants and incentives for qualified businesses that want to rehabilitate commercial spaces in designated areas of the cities.
The Economic Development Incentive Grant, bestowed by Manatee County Government, focuses on job creation in predetermined target sectors.
Florida SBDC Capital Access Specialists guide business owners seeking financing. They offer low-cost training and free consultations to help entrepreneurs through everything from repaying loans to developing a business plan to successfully establishing lender relationships.
About the Author
Kendra Gemma has owned her content marketing business, klg communications, since 2018. She works with a variety of clients, from small marketing agencies to local nonprofits, providing content strategy, copywriting services, and social media management.