Are you looking to improve your business, increase sales and reach new markets but don’t have the investment necessary? Well, growth financing could be the answer to your lack of capital. Growth finance can provide you with the funding needed to take your business to the next level, making it an option that you should not overlook.

What is Growth Financing?

Growth financing is exactly what it sounds like: financing to help your business grow. Growth finance relates to capital loans and mezzanine finance. The textbook definition of growth financing is a loan usually secured by a company’s assets, providing the capital needed to support an opportunity that would increase your company’s sales. Sometimes it is difficult for a business to grow organically without the necessary capital, making growth finance a popular option, especially among new businesses.

Types of Growth Financing

Growth financing mainly comes in the form of a loan or investment. The most common type of loan is an SBA loan from the federal government’s Small Business Administration. The SBA loan is an easier option rather than searching for investors. However, the other common type of growth finance is through venture capitalists or angel investors. There can be a significant amount of time securing funding through a venture capitalist or angel investor, making the SBA loan a more appealing option.

Even though an SBA loan and angel investors are the most popular types of growth finance, there are other less common avenues of financing. First, you should check with your local bank to see if they offer any business loans. This loan would be a typical loan with a set payment schedule. Keep in mind that business loans are usually stricter with required covenants and payment plans, which is not ideal for a small company that is just starting out. Other options include mezzanine financing and vendor financing. Mezzanine financing is a higher-risk form of financing for lenders since it ranks lower in repayment upon default. Vendor financing is a way to purchase equipment on credit with the vendor, allowing you to increase your fixed assets without outright purchasing them right away.

Benefits of Growth Financing

Growth financing can help you scale your business to reach new markets and create new products that are essential in today’s market. New products and services are constantly coming out, making competition fierce. In order to compete and generate profit, your company has to be willing to adapt and innovate, which is challenging without the necessary capital. Growth finance can bridge the gap between your innovative strategies and lack of capital. Utilizing growth finance can help you increase your profit, improve your products and services and allow you to reach new markets, creating an invaluable option for your business.

Summary

Growth financing is critical for many small businesses to reach their target audience and generate a profit. The market is very competitive. Indeed, market trends continue changing every day. This financing allows your business to compete with other top companies. According to ADB, “Without access to credit, businesses cannot grow.” To learn more about growth financing, contact your local accountant, who can walk you through viable options for your business.