How to Access Capital for Your Company’s Scale-Up?

Entrepreneurs look to scale up their operations and invest in new opportunities. While it’s a promising endeavor, expanding a business requires spending tons of money to earn profits in the future. So do you have the appropriate source of funding?

Some companies use their personal savings to finance such expansion projects. However, that may not be enough to cover all the expenses. Plus, it can be risky to one’s personal financial health. So, seeking help from external lenders or investors is often more favorable for many small business owners. 

Debt can be a great way to fund a variety of business activities. But of course, you have to make sure there’s sufficient operating cash flow to pay for the debts and interests, or else there will be financial consequences. So, we compiled sources of capital you can access to scale up your company. 

Traditional Bank Loans

Banks are often the first place businesses think of when looking for capital because they have some of the lowest-cost loans. However, while it can be an affordable option to get funds for your business expansion, obtaining these traditional loans from banks comes with more stringent requirements. 

For example, high credit scores are necessary to get qualified. It’s also worth noting that banks prefer to give larger loan amounts. It means you might have to pay back the money for a longer period. So, if you’re opting for traditional bank loans, ensure to consider the long-term obligations and the overall cycle of your business. 

Online Business Loans

This type of financing is an alternative to traditional bank loans. They have faster processing times and are easier to qualify. You can apply anytime without visiting the bank since everything is online. If you’re approved, you can get the fund you need in as little as one day. 

Even if you have low credit scores, you can find an online lender for bad credit by checking out websites like creditninja.com. Besides your credit standing, they consider other factors, so you have more chances to get qualified than traditional loans. 

Online lenders are more flexible, and they offer various products with terms, payment schedules, and loan amounts that will suit your specific needs. 

Business Line of Credit

It’s another alternative financing that you can use to fund your company’s expansion or other business venture. A business line of credit works the same way as a credit card. It’s like a revolving loan that provides access to a predetermined amount of money, which you can withdraw whenever you’re in need. 

You only need to pay interest on the amount you borrowed, not the total amount available or your credit limit. This option provides you with more flexibility, especially regarding sudden and short-term financing needs. The drawback, however, is that you might have a hard time getting qualified if you don’t have an established business track record or stellar credit score. 

Microloans

Most small businesses experience credit crises. Fortunately, there’s the Small Business Administration (SBA), a federal government agency that supports and protects the interests of small business owners. 

Through their microloan program, you can expand your small company. Typically, microloans can go up to $50,0000, which you can use for a variety of purposes, such as working capital, inventory, or equipment. But you can’t use the fund to pay off existing debt or purchase real estate. 

The SBA has approved lenders that decide and set all terms for your microloan. They have their own lending and credit criteria. But they may require some form of collateral for you to get approved. 

Crowdfunding

You can also raise capital using online crowdfunding platforms. It involves seeking out a large number of people that are willing to put in money to support your business project. Most of the funders do it for charitable donations. However, they can also get rewards or equity and more in return for their money, depending on the type of crowdfunding you choose. 

It’s a great way to get the fund you need for your business. However, it can be time-consuming since you have to make a plan and put details on the site that will appeal to your target funders. 

Also, ensure to read the fine print of the crowdfunding platform you’ll use. For example, some may restrict your access to the money or take a percentage of your earnings. 

Venture Capital

A venture capital is a form of equity financing that you can access to fund and grow your business. This means you have to give up some ownership or equity in your company to an external investor in exchange of the funding.

The venture capital firm will accumulate funds from wealthy individuals and companies that long to invest. Once they raise a fixed amount of money, they will invest it in promising small and medium businesses. 

It’s worth noting that most venture capitalists prefer businesses that are technology-driven. So if your business has high-growth potential in information technology, communications and biotechnology, seeking for a venture capitalist might be a good option. 

Peer-to-Peer Lending

Peer-to-peer (P2P) lending is an easy way to get the fund you need for your business. This form of financing has quick disbursals and easy repayment methods. All you need to do is apply and take out a loan through the P2P lending platform. Based on your financial needs and preferences, the platform will match you with investors willing to extend you the fund. 

The P2P websites have options for all types of borrowers. This means you can secure financing even with less stellar credit history and scores. You can select the amount you need to borrow and for how long you’re going to repay it. Plus, you’be able to see the potential interest rates and whether you’re qualified for the loan. 

Assess All Your Financing Options

One of the capital sources we mentioned here can be the right option for you. But feel free to explore and assess all possible financing options for your company. 

Remember that you know better the ins and outs of your business’s financial needs. So, take the time to weigh the risks and benefits to select the best sources of capital for your scale-up and other business-related projects. 

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