Owning and running a business is often incredibly joyful. Many people love the feeling of being their own boss. When business continues to flourish, it may be time to look into ways to expand into new markets. At the same time, the process of expansion needs to have enough capital to get such plans off the ground. Most business expansion plans require money. The owner may need to buy additional stock, hire new employees and find the rent for new office space.
A business owner in search of ways to finds the money for their planned expansion can opt for many possible sources of funding including:
- Personal savings;
- Family and friends;
- Bank loans and
- crowdfunding from the public.
All such options have both pluses and minuses. It is important for any business owner to know what kind of funding is going to work best for them. A combination of varied sources of funding may be the best possible path to expand an existing business.
Using Your Own Savings
One option that has many advantages is that of using your own funds. Using your own funds can be ideal. You don’t have to go through any hurdles or fill out any paperwork in order to get access to such funding. The funds are available immediately.
At the same time, there are risks in putting up your own capital entirely. Many business owners use their business as their sole source of income. If something goes wrong with the new plans, the owner may be left with little fall back on. It can make hard for them to pay their bills and fund their retirement. This is option that should be considered very carefully.
Family and Friends
Family and friends are often looking for ways to be part of a business model that’s clearly working out. A close friend may have savings they want to invest in your business. The same is true of siblings and cousins. Working with family members often means working with those who share your passion and care deeply about the results. They are investors who may also be willing to wait to get a profit until you’ve gotten things in place in full.
Having patient and caring investors who really believe in you and care about your success in life can be appealing. While this can be a good option, keep in mind it can be hard to separate your business and personal life.
Having your actions constantly monitored and your intimate financial matters known to others in your family and close circle of friends can make holiday gatherings uncomfortable and deeply awkward.
Bank Loans and Venture Capital Investors
A more formal possibility is a bank loan or working with a venture capital firm. Banks have a process in place that lets business owners apply for the funds they need to get an expansion in place. Eyal Nachum, the co-founder of Lithuanian fintech company Bruc Bond, says: “Working with banks can be a great way to get access to large amounts of capital. Bank officials can also help the business owner decide what kind of business expansion plans work best for any given owner”.
They can provide a clear eye of the entire process. The same is true of a venture capital firm. All business owners should remember that taking out a business loan means paying interest and paying it back on a set schedule.
In the modern world, there are many ways to reach out to an audience. People are always interested in new ideas and products. They’re also interested in new ventures they might not have heard about before.
A thoughtful business owner can take full advantage of this platform and use it to their benefit. Crowdfunding allows the business owner to make their case to the public and ask for their help. This can be a great way to raise small amounts of capital from lots of different individual sources.
Anyone who is considering this option should also keep in mind that donors may not be vetted before they offer funding. They may also not know what to expect from the money they’ve invested in a venture.