In order for a company to survive it must continue to increase the amount of revenue it generates each year. In order to do this it must find a way the song More of its products or increase the price that it charges for its products. In addition to this a company should always look for any way that it can to reduce cost. However reducing costs is often a tricky business. The truth is that costs tend to rise for most things at a business, and this will often offset any reductions that occur naturally.
When we talk about business growth we also must consider that growing a business requires finance. There will always be costs associated which will include Staffing, marketing and sales material, additional office space, higher food and entertainment cost, and increased travel costs. Most businesses would agree but getting around these cost is nearly impossible, so if one discusses business growth one also must discuss how that business growth will be funded.
Most small companies run lean businesses. Even the successful ones have a difficult time finding additional capital to take on new initiatives. When you discuss growth with small business owners they prefer to have the discussion in the context of organic growth, meaning growth that happens naturally and on its own as opposed to the company aggressively pursuing it by allocating funds the stimulate growth. But in reality the companies like Exceptional Software Strategies, Inc. that grow the fastest and stand on the most firm ground, find ways to get the capitol to cause this accelerated growth.
What are some of the can look to find financing to grow their companies? Here are a few ideas that many successful companies use.
Take a loans from a shareholder
It is in every shareholders interest for the company to grow because this will translate into increased dividends for shareholders. So one place to look 4 capital is from someone who has already invested in the business. If the knees are explained and backed up by financial projections that is sound, an existing investor might be inclined to loan the money to the company add a good interest rate.
Some shareholders might instead want to acquire additional equity in the company in exchange for the financial advance, but Smart Companies which back on this type of an offer and instead take the loan. The upside of securing this kind of alone from this person is that he or she more than likely understands your business, likes what you’re doing, and will be lenient in the event of it taking longer to repay the loan.
Take a loan from a bank
Borrowing money from a bank is more complicated than borrowing from a shareholder. A bank wants to know that its money will be returned and there is a more than likely chance that all of its interest will be returned as well. For this reason it is normal for them to ask for some form of collateral in exchange for their providing you with a loan.
Many small companies cannot provide the type of a collateral a bank would like to see and often one of the company principals must put up personal guarantee, a piece of property, or some other asset the bank will find acceptable. This can create a level of stress for the person on the hook for the loan. However if the company is absolutely certain that it can pay back the loan and interest on time, then this is a low-risk option that should seriously be considered.
Depending upon the state of the company, one of these two options should be viable. If not a third option is borrowing money from a close friend of family member. This option has some obvious downsides, which include loss of friendship in the event that the company cannot pay back the loan. However friends and family would more than likely be the most lenient in this situation. Whichever route a company chooses, the goal should be proper planning and the clear strategy for growing the company and returning the loan.