25 Mar How to finance a business that is in the growth stage?
When a small or medium-sized company is in a growth stage, it may face challenges that require greater economic support. And it is here, where financing becomes an important pillar to be able to fulfill the necessary strategies that will be able to further boost the operation of the business.
Challenges in the growth stage of a business
1. Cash flow
Cash flow is among the main challenges. Which in this stage usually stays very stable, limited to control the daily operation and be scarce for the opportunities to grow. That is to say, the income already manages to sustain the expenses, but they do not become enough to be able to invest in the strategies that will take to the business to grow. For example, a new branch, an alliance or tender, the creation of a new product, among others.
The capacity of production and operation is another challenge, because when you want to grow a business, you should think about the effects and needs that will arise. In this stage, it is necessary to invest to supply the market, counting on the tools and space necessary to optimize internal tasks. For example, machinery, technology, transportation, a larger space, warehouses, et cetera.
3. Talented staff
Also, the human resources that guide and carry out the strategies must be added to the business. That is, it will be necessary to hire staff to support each of the areas that will require more support. You must take into account that managerial as well as production and customer service positions will have to be filled in order to consolidate growth.
Next, we will tell you the ideal types of financing for this stage.
Financing to achieve your business
One option is to look for individual investors to contribute money to your business and thus support the growth strategies you have planned. For this you can approach both investment platforms or directly to potential investors. You need to present a highly detailed plan, in which you highlight the financial status of your company and the budget of what you require and how you will use it. The return of this investment can be as the recovery of the contribution or a percentage of participation within your business, this depends on the agreement or intentions that both set.
There are government subsidies for lost funds, that is, they must not be returned. But for this reason they are usually limited to the public and sometimes for small amounts. They are determined by industry, region and type of business but are optimal for strategies such as acquiring machinery or raw materials. An example of this in our country, may be the secretaries. SAGARPA offers subsidies to support businesses that are developed within the livestock or farming industry.
The institutions called accelerators are those that support established companies. They provide sufficient tools to accelerate their growth, ranging from improving their business model, attracting customers and even acquiring financing. In return, they may ask for some participation within if they consider that the business is profitable and has greater opportunities to continue growing. In our country there are already several, for example, 500 startups, Feher & Feher, Endeavor, among others.
Venture capital is also another option that works to sustain the growth of a company. There are institutions such as Investor Angels, Jaguar Ventures or Ideas & Capital, which in addition to providing capital, provide their experience so that both can win. It should be noted that the majority is committed to revolutionary companies and immersed in technology. Here, the financial resources that you get are in exchange for a participation that in the future can be sold, once you have achieved growth, this to generate a greater benefit to the investor.
Obtaining financing through a loan from financial institutions or traditional banking can be favorable in a growth stage. This is due to the amount you can obtain, since the credits for businesses have been designed to cover the expenses that these tend to have throughout their lives. Unlike the previous options, here you can know in a more precise way what amount you would be receiving and the time and manner of return.
In the same way, you can obtain the money in a shorter time and thus start all your projects to grow as soon as possible. Konfío is one of the institutions that offer financing to boost business through competitive conditions. And thanks to your process that is totally online, you get an answer and your money immediately.
Now that you know how to finance a growing business, choose the best option. We recommend that you evaluate all the alternatives and compare them according to your needs and financial capabilities.