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January 27, 2016

How Business Owners Get Growth Capital

Business owners may be initially reluctant to take out small business loans. All that debt can be daunting to see before you’ve even turned a profit. However, unless you are independently wealthy and have unlimited access to your own assets, you will need growth capital to assist you in moving beyond the planning phase into actual production.

 

If you are a small, community-based business, you may be eligible for local grants and loans. You may find more opportunities than you were aware of right in your backyard if you contact your city council. Towns and small cities commonly offer start-up packages to first-time small business owners as a part of their local improvement schemes. Most likely, this form of growth capital will come with a very supportive package, and low interest compared to what you may find at a big bank. Always start local, especially if the service you are providing will give back to the community in some way. Independent community banks and credit unions are another option for your initial capital. This is another resource that typically comes with lower interest rates and motivation to help local businesses thrive.

 

A viable option for larger scale investors may be to seek funds from sources such as venture capitalist firms. This may come with a greater interest in the direction of your company than you would experience with a small business loan from a bank. Venture capitalists typically want to have their opinions heard in terms of the company’s operations, as they have a greater stake in the business itself than lenders at a bank. Frequently, this just means they will want a representative to be present on the company’s board to be kept up to date on the progress and direction. Going this route when seeking growth capital may lessen your personal ownership, but at least you will not have as massive a debt to repay.

 

Lastly, if local business grants and venture capitalist investors are few and far between, you can still amass your growth capital via borrowing from a bank. It is imperative to spend adequate time doing your research, if this is the path you take. Unlike investors, banks are not concerned with how well your business is doing – they only care about whether or not they are getting paid. There is usually less flexibility associated with these funds, and the interest rates can be high. However, it is certainly another viable option to secure funding for your new business. There are many sources for accruing capital; it’s just a matter of determining which one is the best fit for you.