Five Ways to Finance Your Business

Whether you want to expand; buy machinery that will save you money and enhance profits in the long term; or just secure your working capital situation, funding is an integral part of business and getting it right is crucial to success.

Happily, there have never been more options for Australian business owners looking for finance. This means that there is a lot to take in and understand if you are to have a chance of securing the best possible deal for you and your enterprise.

Here we take a look at five very different ways of financing a business:

Get a Business Loan

A business loan, either from a bank or alternative lender, will provide you with a lump sum of money, and you can apply for an amount suitable for your needs. Repayment terms can also vary, so you could elect to pay the money back over one year, or five, for example.

The longer you have the loan, the more interest you will pay. But because lenders charge a whole array of fees on top of interest, and the deals available can vary significantly, it pays to shop around. Make sure you read the small print and include all fees when comparing the cost of business loans.

In order to qualify for an unsecured loan, a business will almost certainly need a good credit record. If you haven’t borrowed before, a secured business loan may be possible but unless the business itself has sizeable assets, that will likely mean putting your home on the line.

Angel Funding

Small businesses with big expansion plans should consider the possibility of bringing another owner into the equation. This is known as equity funding and the advantages are that you can raise a lot of money, and you never have to pay it back!

‘Business Angels’ in particular can be an attractive equity partner, because they bring expertise and connections which they use to help the businesses they invest in. For those with ambitious plans, this can be a real help when it comes to finding the next level of customer, or getting their product stocked by big chains, for example.

The drawback is that, being business experts, angels tend to drive a hard bargain: they will want a sizeable share of your future profits – in perpetuity – in exchange for their funding and help.

Turn to Family

If you don’t like the idea of handing a stake in your business to a stranger – however well connected – then you could consider turning to family or friends for backing. This might sound amateur, but thousands of successful SMEs have been built this way.

Private business financing arrangements like these can be done on a debt basis or an equity basis: ie, your relative could provide a loan to be repaid on agreed terms, or take an ownership stake in the firm.

Not everyone can access this form of finance, of course, and it is unlikely to cover the expansion plans of a sizeable company.

Crowd-Sourced Funding

The wonders of the Internet have brought a new form of business funding into the mix: crowdfunding. Australia moved quickly to regulate this area, which is why here, crowdfunding is now referred to as ‘crowd-sourced funding’ when it relates to businesses.

In principle, you can now use a registered crowd-sourced funding provider as a kind of junior stock exchange, selling a large number of small stakes in your business to ordinary people. However, the system tends to work best when it is combined with a strong brand identity and a drive to get early customers on side.

Some of the best crowdfunding campaigns have involved an enthusiastic customer base helping to get a business off the ground because they want a certain product to become available. Rewards for investing could be rights to the first products made or a series of discounts on a service, along with a largely symbolic ownership stake

Smart Cash Flow Finance

For businesses which are already established and trading with other businesses, cash flow finance provides a straightforward way of raising cash for expansion, buying equipment or increasing working capital.

Cash flow finance, often called invoice discounting, means that a business gets its invoices paid immediately by a nimble finance provider such as OptiPay, instead of waiting 30, 60 or even 90 days for the customer to settle.

With OptiPay, you don’t need a credit record or security, just good credible customers who you invoice. Many business owners fail to consider the power of cash flow finance when thinking about their business funding options, but it can be the easiest and cheapest way of raising the money you need, especially when it comes to financing a steady growth in orders. Call OptiPay today to find out how much you could raise.

“Get tomorrow’s cash flow today.”