7 Ways to Get Growth Capital for Your Business

Raising money from investors can be one of the most complex parts of starting a new business, but it doesn’t have to be that way. 

The best way to approach growth capital is by having your plan and pitch ready, knowing precisely what you want and how much you are willing to give up to get it. 

Keeping these tips in mind as you go through the process of getting investors on board with your idea. This article will discuss seven ways to get growth capital for your business.

What is Growth Capital?

Growth capital is money you borrow from a bank, investor, or other financial institution to grow your business. 

It is essential to know that this financing type differs from a loan because you don’t need collateral to get it. The only thing required is the ability of your business to repay the money over time. 

 

Growth capital can be essential if you want to expand or make significant investments in inventory, equipment, technology, marketing campaigns, etc. Several avenues are available when seeking growth capital, including credit cards.

7 Ways to Get Growth Capital for Your Business

Getting that growth capital can be challenging, but knowing where to look and what to do can also be accessible. Here are seven tips to help you get growth capital for your business in no time.

1. Traditional Bank Loan

A traditional bank loan can be an excellent way to get growth capital for your business. 

If you have been in business and had a positive cash flow for at least six months, this type of financing could work well.

Many factors go into consideration when considering a loan application, including credit score and equity stake in the company. 

A personal guarantee may also be required if you don’t have substantial assets or equity to offer as collateral on the note.

2. SBA Loan

The SBA loan is a fantastic way to get growth capital. The application process is relatively easy as long as you are an established company with a history of generating revenue. 

It is important to remember that this type of loan is intended for something other than start-ups or unproven companies and will require a down payment from the business owner.

If your company does not have enough tangible assets, you can use your home equity line of credit or another type of collateral, like stocks, bonds, etc…

3. Venture Capital

Venture capitalists are a potential source of growth capital. Knowing the difference between a venture capitalist, an angel investor, and a private equity fund is essential. 

● Venture capitalists: Venture capitalists typically provide financing in exchange for equity.

● Angel investor: Angel investor or private equity fund will provide financing in exchange for an ownership stake in the company. 

Venture capitalists can be further differentiated by their level of involvement with the business: some offer hands-on management assistance, and others do not.

4. Angel Investors

Angel investors are wealthy individuals who invest in start-up companies in exchange for equity. 

Angel investments can come from various sources, including a seed fund or venture capital firm. 

This investment is often the first round of outside funding that a business receives, typically ranging from $25,000 to $1 million. 

 

Some investors will also guide how to grow and manage the company.

There are two types of angel investors: accredited and non-accredited angels. 

1. Accredited: Accredited angels must have a net worth greater than $1M, excluding their primary residence, or an income greater than $200K per year for the last two years (or both).
2. Non-accredited angels: Non-accredited angels need only U.S. citizens with at least one year’s experience as an executive officer (CEO, COO) or board member in an operating company with revenues exceeding $2 million per year.

5. Friends and Family

Talk to your friends and family. They are usually the first people you want help from when starting a new business, and they may be the best source of capital available. 

It would help if you did not rely on them as your only source of funding, but they can provide you with a lot of support to make your business succeed. 

About how much money you will need to start your business and how long it might take to become profitable. Ask if any of them would be willing to invest in your venture. 

Explain what type of return on investment they could expect from investing in your company. If someone is interested, speak with an attorney about setting up an equity-based agreement before taking their money.

6. Crowdfunding

Crowdfunding is an excellent way to find growth capital for your business. Several websites offer this service, but the two most popular are Kickstarter and Indiegogo. 

Both sites have various fundraising goals, so you can focus on what will work best for your business. 

The typical arrangement is that you set up a campaign page and then promote it on social media, email lists and other networks while allowing people to donate money in exchange for a product or other benefits.

7. Grants

Grants can be one of the best ways to get growth capital as they are often more accessible than loans and have fewer strings attached. 

There are many different types of grants, each with its requirements. To determine if you qualify, you can fill out a grant inquiry form that will ask you questions about your business, like the type of work it does and the number of employees. 

They will give you a list of potential grants and other information if you are eligible.

Conclusion

Luckily, there are many avenues you can explore to get the growth capital your business needs. Have a plan in place when applying for funds, and you will be sure to find success.