People starting new businesses often need startup capital. There is an assumption that those already operating businesses can reinvest company revenue to improve the organization or overcome any challenges that it may experience.
However, sometimes existing companies need financial support to address increasing operational costs, expand into a new location or develop a new product. Companies that have already proven profitable can sometimes secure loans from banks. Some business owners may want to look into alternative options that provide more flexibility than a bank loan. There are three common solutions that can help businesses generate capital for sudden expenses or business growth.
Bringing in a partner
When one person operates a company as a sole proprietorship or a limited liability company, much of their personal wealth may already be tied up in the business. They may not be able to infuse the company with more capital when there are unexpected challenges or major growth opportunities. A business partner who has capital to invest can help the current owner achieve their goals. A partner may be happy to provide that capital in return for an interest in the company and a share of its profits in the future.
Crowdfunding
Crowdfunding is a popular option among those rolling out new products or services. Creating a digital crowdfunding campaign where consumers can pre-order a product or support a business by purchasing gift cards to spend at a new location can be an excellent way to raise capital and brand awareness simultaneously. Those who participate in crowdfunding activities may feel a sense of brand loyalty and may also share the crowdfunding attempt with friends and family members.
Seeking private investment
It may also be possible for business owners to make pitches to private investors without giving them an ownership interest in the company. There are investment clubs that help sponsor growing businesses. Successful professionals may also invest privately in business concepts that they believe offer an opportunity for profit.
Each of these solutions has benefits and drawbacks for those hoping to expand or strengthen an existing company. Discussing financial needs and long-term goals for a company with a skilled legal team can help business owners determine the best means of securing the capital they need.