Owners need to infuse additional capital into their businesses if they want to make them grow. However, most entrepreneurs face a whole lot of friction in this area. If you are at this stage, it is time to tap more into your creativity and resourcefulness.
Foremost, you must educate yourself. Over the years, multiple ways of funding startups and small businesses have emerged. You can classify them into two types: equity and debt. Of course, it will take further research to learn about each way. But this article will give you an overview so you can narrow down your options. Ultimately, you will have to decide which course to take. Let’s get started.
Learn when and how to pivot
It will not be enough to believe your product has a big potential. At the most basic level, you need to conduct a breakeven analysis. How many subscribers, contracts, or deals do you need to close to generate profit from it? But even if you have the facts and figures, you also need to factor in the inherent risks, such as the cost of producing each unit and fluctuations in demand.
When you have considered these things and still believe your product should see the light of day, then get creative with your approach. Offer your services 'to generate cash flow and build up a fund for your product-based business', wrote Simplus CEO Ryan Westwood on Forbes.
Find leverage from a working capital loan
A declining net working capital means your current assets do not exceed your current liabilities. It is a sign that you may not be able to pay some or all of your debts. In a worst-case scenario, you will be forced to file for bankruptcy.
But before you go for broke, find out if your business is eligible to apply for a working capital loan. According to Small Business Loans, you can use this specific loan to cover operational costs. In other words, it allows business owners to recover their net working capital, which then allows them to generate a return on investment (ROI) again.
Look for good investors
If you have been bootstrapping your business from day 1, you may have doubts about going to a venture capitalist or an angel investor for help. It is also understandable why you will not give your equity lightly, even if it means you won't get the much-needed funds. If you are invested deeply in your creation, you will want it to follow the vision and direction you planned.
But if finding investors cannot be helped, then you should at least do your homework. Make sure to deliver the vision during your pitch. And investigate the track record of potential investors. The last thing you want is to get booted out of your company, together with the dreams you had for it.
Get a partner onboard
If you have a friend or an uncle with deep pockets, can he or she be your partner? It depends. Does this person have the proper knowledge and skills to run the business with you? If you do not want to have bad blood with any of your friends or relatives, consider selecting a co-founder from within your network or field.
You need to outline your criteria for choosing a partner. And since you will now divide the profits into two, you will have to make some adjustments on your end. Ensure that your co-founder understands and aligns his or her goals with yours. And do not forget to set up the buyout agreement from the get-go.
Try other forms of funding
There are alternative means to get funding. One way is through factoring, in which you sell unfulfilled invoices to a factoring company. In turn, the factoring company will take care of collecting the invoices when they are due. You will be required to inform your clients that you have sold their invoices. And this can hurt your reputation, signaling to them that you are not able to meet your financial obligations.
Another way is through applying for small business funding grants. The government offers such grants to small business owners with little capital. However, you need to meet certain qualifications before you can get access to free money. So check if you and your business qualify.