How to source funds to expand your business

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StrategyDriven Managing Your Finances Article |Funds to expand your business|How to source funds to expand your businessAs a small or medium enterprise business owner, you are probably always looking for growth opportunities. To realize such opportunities, you need a lot of money, and often you may not have that much to help you realize your dreams. You will need to source funds from other sources to make the most of the opportunities that come your way. But sometimes, due to the lack of financial literacy or good financial advice, you may end up making the wrong choice. For instance, you need to know the difference between grant & loan to know which one best suits your needs. Here are some options that you may consider when sourcing funds to expand your business.

Bank loans

Bank loans remain the most common option for most businesses looking to expand. Bank loans provide medium to long-term finance for your business. You will need to provide some documentation about your business, a plan, and collateral to acquire one. To be safe, get a financial advisor to help you understand the loan terms before deciding to go in for it.

SBA-backed loans

Only available in the United States, The Small Business Association offers small businesses various loans via participatory banks all over the country. SBA-backed loans are set up to help small businesses secure funding to grow their company specifically. Mind you, though, the SBA itself is not responsible for the loan. You will need to have a good working relationship with the loan officer at your local bank to gain access to such loans. You could also find the nearest Small Business Development Center SBDC and register to access their small business loans.

Venture capitalists

Venture capitalists are people who choose to invest in businesses to help them start-up or expand. Venture capitalists are looking to make a good return on their investment and, as such, may get involved in running the business or offer their expertise. Due to the huge amounts that venture capitalists look to invest in a business, you must have a solid business plan and serious projections for the future for you to be considered. The basic sums venture capitalists invest are from $500,000 to $10 million, so you must have a high growth strategy to entice them to listen to your pitch.

Angel investors

Much like venture capitalists, angel investors are looking to invest in businesses and see them succeed. The significant difference here is that instead of looking out for returns, angel investors rather want to transform their investment into the equity of your business. But they may not invest as much as venture capitalists. To seriously consider angel investors, you must first have an exit strategy for your business and solid projections for the future. If you aim to hold onto your business, then angel investment may not be for you. The goal is to gain equity, help the company grow and then sell it or when it goes very well, do an IPO.

Crowdfunding

This type of source funding has seen quite a hike as there have been many success stories. It is pretty straightforward; you ask people to donate a sum of money for a particular project to exchange diverse rewards. These rewards are generally categorized into equity, debt, and donation. However, to participate in crowdfunding, you need to know the rules and requirements of the sites and carefully review your options before you proceed.

Small Business Bankruptcy – The Next Steps

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StrategyDriven Managing Your Finances Article |Small Business Bankruptcy|Small Business Bankruptcy – The Next StepsBankruptcy might be your best shot at eliminating debts and restructuring your finances. 2020 brought with it an economic disaster on a scale not seen since the Great Depression. Forbes predicts bankruptcies this year will increase by over 140%, and these bankruptcies will affect small businesses the most.

Bankruptcy Options For Small Businesses

Depending on what kind of business you own, its income, and your relationship to it, there are potentially three types of bankruptcy available to you. We will break down chapter 7, chapter 11, and chapter 13 in detail so you can decide what bankruptcy option is right for you.

Chapter 7

This option is best if you are a general partner or sole proprietor of a business. Chapter 7 can eliminate all debts for which you are personally responsible. You can file for certain exemptions that may make it possible for your small business to continue operating.

What Exemptions Can Keep Your Business in Operation?

Your chapter 7 trustee cannot sell off exempted assets, but what counts as a potential exemption varies state by state. So, depending on where and how you operate your business, it may continue despite the bankruptcy.

Some state exemptions allow debtors to exempt “tools of the trade,” which can cover items essential to certain types of businesses up to a certain price. Another exemption that may be available to you is a “wildcard” exemption. These protect any asset of the debtor’s choice.

Chapter 7 For LLCs and Corporations?

If you are an LLC or corporation, chapter 7 can only really help you liquidate your business. Unlike chapter 11, there is no way to keep your business operating under chapter 7. All of your business’ assets will be liquidated.

Chapter 11

Chapter 11 bankruptcy is the stereotypical type of bankruptcy you hear about in the news. When giant corporations claim bankruptcy, this is usually the kind they file. However, the majority of chapter 11 bankruptcies are filed by small and medium-sized businesses.

Under chapter 11, business entities like LLCs and corporations can restructure their debt by selling some assets. This option allows businesses to remain in operation, usually at a reduced scale.

Special Provisions for Small Businesses

Chapter 11 bankruptcy is a time-consuming and expensive process. Usually, larger businesses can handle the costs, but smaller companies may have trouble with the legal fees and restructuring costs.

The CARES Act and Small Business Bankruptcy

Since the CARES Act increased the debt ceiling for small business bankruptcies in 2021, the bankruptcy code considers a small business as an individual or entity that owes no more than $7,500,000 of business-related debts. This amount will hold until the provision is set to expire in March 2022. Previously, the debt ceiling was only $2,725,625.

The Creditor’s Committee Can Be Waived

The creditor’s committee is formed to protect the interests of the creditors, and it is formed and retained at the debtor’s expense. This includes fees for attorneys, experts, and other legal professionals. Creditor’s committees are usually very expensive to maintain. A designated small business debtor can petition to waive the creditor’s committee from the bankruptcy process.

More Oversight, Deadlines, and Reporting for Small Business Debtors

Small business debtors are subject to stricter guidelines, increased oversight, and more rigorous enforcement of deadlines for meeting all of the steps in the bankruptcy process.

Chapter 13

This bankruptcy option is only meant for individuals, but by default, becomes available to individuals who are also sole proprietors. LLCs or corporations are not eligible for chapter 13. This option is typically harder to file for because it allows the debtor to keep most of their assets and creates a payment plan for the debtor to pay off some of their debt.

This means that as the sole proprietor of a business, you have three to five years to pay back some or all of the debts in monthly installments. You can select workspace and equipment as some of your exemptions and, technically, through chapter 13, you can keep your business in operation.

What Option Is Right For Your Business?

Declaring bankruptcy is a massive step toward debt relief. By knowing your options, you can make an educated decision and select the chapter that is best for you and your business interests.

About the Author

StrategyDriven Expert Contributor |Veronica BaxterVeronica Baxter is a writer, blogger, and legal assistant operating out of the greater Philadelphia area. She writes extensively for the Law Offices of David Offen, a bankruptcy attorney in Philadelphia.

Gain The Funding You Need To Grow Your Business

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StrategyDriven Managing Your Finances Article |Funding|Gain The Funding You Need To Grow Your BusinessAre you thinking about growing your business? Growing your business is important and it’s one of the measures of a company to determine whether it is successful. If your business remains stagnant on the market for too long then the longevity of your model will almost certainly be called into question. However, growth does cost money. So, let’s look at some of the ways that you can fund a change like this in your business model.

Self Fund

First, you might want to think about self funding your business growth plan. This could be possible if you have enough money already in your personal accounts. Even if you don’t you might be able to free up some money. For instance, you could sell structured settlement damages that you claimed in a court case. This will provide you with a massive sum of money that you can then inject into your business. There is absolutely no limit on how you use annuity like this. If you want to fund your business with the cash, then you can.

Head To A Tradeshow

You could consider attending a tradeshow to gain the funding you need for your business. Attending a tradeshow will be useful because it means that you will be able to get the interest of investors. Unfortunately, attending a tradeshow is also massively expensive so it does require you to take on quite a lot of risk. You’ll have to spend about a year planning for this type of event and you need to think about ways to ensure that your business does stand out. However, even with these issues attending the right tradeshow can catapult your company to new heights.

Get A Loan

Next, you could think about using a loan to fund the growth of your business. If you are going to get a loan for a company, then you’ll need to ensure that your books are in order. It’s essential to guarantee that you are not in the red or taking on too much risk. Your credit rating can also impact your ability to get a loan for a private company. As such, you might need to improve your credit before you take this action and move forward with this possibility.

Other loan options include private equity and venture capital funding. However it is important to know what position is right for your business and what you qualify for. Taking on the wrong type of funding can go one of two ways so while both of these are viable options for funding you should research private equity vs venture capital funding to ensure you know exactly what you are getting into.

Crowdfunding

Of course, you could also look at crowdfunding options as well as a way to get the money that you need to grow your business. This could be a useful option if you are planning to sell a new product or service and you know that there’s already an audience interested in buying. Crowdfunding is a smart choice if you know how to build demand, get people excited and use viral media. However, it’s highly competitive these days and it’s difficult to breakout or get attention unless your company has a hook. There needs to be something unique that makes an audience connect.

As you can see, there are numerous paths that you can choose which will allow you to fund your business growth. It’s just about choosing the right one for your particular business model.

Government Funding Can Elevate Your Business: But Know What You’re Getting Into

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StrategyDriven Managing Your Finances Article |Government Funding|Government Funding Can Elevate Your Business: But Know What You’re Getting IntoFunding is always at the top of mind for small business owners. From startup costs to expansion, your current cash flow dictates how you structure your business and plan for the future.

There are as many different funding stories as there are businesses. Venture capitalists, self-funding, crowd-funding, and loans can all be a good fit at times, but in some industries, government grants are the easiest, fastest way to grow.

There are pros and cons to working with government funding, but if you go into the process armed with facts and flexibility the pros generally outweigh the cons.

The upside to government funding

Government funding is appealing for obvious reasons. It’s generally free to apply for and, unlike a loan, doesn’t need to be paid back. Most government programs also offer some form of mentoring service or access to research and development opportunities. With more resources at your fingertips, you can level up your skills as a business owner.

Government grants also provide instant credibility to your organization. Having the backing of a state, federal or national agency shows that you have a solid plan and beat out other proposals. That vote of confidence can go a long way in attracting customers and investors.

Do your homework

As with most things in business, working with government funding is complicated.

Finding grant opportunities is generally as simple as searching the internet, but finding the right opportunities is a different matter. Government grants generally have a focused set of goals and strict requirements. Applying for grant money that isn’t a good fit is a waste of time.

Once you’ve identified a solid funding opportunity, it’s good to do some background research on the grant process in general. Things move fast in the corporate world, but the government operates a little differently. Expect the process of applying for and being awarded funding to take at least 6 months.

You should be prepared for the complexity of the process, as well. Missing technical details can disqualify your application. Plan on turning everything in ahead of schedule, so you have time for last-minute additions and corrections.

Know the cost

While government grants don’t drain your financial resources directly, don’t be fooled into thinking there is no cost associated with them.

Once you get through the application process, if you’re awarded a government grant, there are conditions attached. You’re expected to provide regular reports, which means a lot of paperwork and a large time investment. You are responsible for the administration of the funds, and must stick with the plan you outlined in your application.

In some cases, you might also be asked to participate in PR efforts, giving press interviews or meeting with government officials. Think of these events as opportunities to put your business in front of new audiences.

An influx of cash is always welcome, but when it comes through bureaucratic means, you will be pulled into some red tape.

Have a plan B

When working with the government, you are at the mercy of the political landscape. This means that the people you work with, policies and procedures, and departmental goals can change every couple of years.

An awarded grant is like a contract––the money that you’ve received or are due to receive over the course of a year or two won’t be affected by every election. That said, you need to be aware of politics, shifting legislation and administrations when working with government agencies. Electoral results can definitely have implications for future funding opportunities.

Grants also run out after a set period of time, and it’s not guaranteed to be renewed. Using government funding to add to your business is a good plan, but relying too heavily on that money can set you business up for failure if it falls through. Plan ahead, and have an exit strategy if you don’t receive grant money in the future.

Conclusion

Government grants are an incredibly useful tool for small business owners, but navigating the process takes patience and real work. Understand the advantages and disadvantages before diving in, have a backup plan, and you’ll be well prepared to take advantage of the valuable programs available to small business owners.

About the Author

StrategyDriven Expert Contributor | Tim CarterTim Carter is an entrepreneur and the owner of Discovery Tree Academy, a top rated childhood development center with locations in Springville and Payson, UT. Tim began his entrepreneurial journey at the young age of 19. He has experience in sales, professional cooking and is even a licensed pilot. Weaving his diverse talents together, Tim is on a mission to create a better childcare model. His passion lies in helping kids thrive, including his own daughter and twin toddlers at home.

5 Ways Outsourcing Your IT Will Save Your Company Money

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StrategyDriven Managing Your Finances Article |Outsourcing|5 Ways Outsourcing Your IT Will Save Your Company MoneyLet’s face it: there are tons of web pages that describe the benefits of outsourcing specific functions of your business to external third-party companies. But, when it comes to IT or Information Technology, does it actually save your company money?

The thing is, you could quite comfortably streamline your IT processes and run a lot of them in-house. However, the downside is there are hidden costs to keeping your IT management within your business. Here are five ways outsourced IT services will save your firm money:

1. Staff Costs

As your business grows, you will undoubtedly hire new people to perform various functions within it. After all: you can’t do everything yourself, and telling yourself that you can is both unrealistic and foolish!

How can managed IT services save you money from an employee perspective? Firstly, the fees you pay for outsourced IT means you don’t have to pay for each employee that works on your business networks.
Secondly, you don’t need to incur extra costs, such as arranging tax payments, insurance policies and complying with various employment laws.

2. Training

As you know, the technology world moves at such a rapid pace that yesterday’s innovations could become tomorrow’s obsolete products. Each year, software and hardware vendors release new tools – many of which you use daily within your business functions.

Whenever there’s something new to the market that your business needs to use, your employees will need training, so they know how to manage any new processes. Training is seldom free or cheap, especially when it comes to IT training.
The beauty of using an outsourced IT partner is they incur such training costs. You don’t have to pay any extra fees.

3. Outdated Technology

When you pay a company to handle your organization’s IT needs, part of the deal will almost certainly involve upgrading your software and hardware when they become outdated. That’s because current technology will ensure your business runs as efficiently as possible.

If you handle all your IT, you would need to cover the cost of any software and hardware upgrades separately. However, outsourced IT services management can include provision for annual upgrades, and you’ll pay a fixed monthly or yearly price for those services.

4. Smaller Premises

Outsourcing your IT also means your organization doesn’t have to lease or buy large premises to house various computer equipment and the employees that manage them. That’s because most of the services provided get conducted remotely.
Smaller premises equate to cheaper leases or purchase prices, and that also means your business will have more money in the bank to invest in other areas and grow.

5. Expert Advice

Lastly, the problem with having a small in-house IT team is they might not necessarily know the best ways of streamlining your technology processes and saving your organization money.

Outsourced IT service management providers work with businesses and organizations of all sizes. Part of their job is to research and provide proof-of-concept of efficiency changes and cost-cutting measures to their clients.
As one of their customers, you can benefit from their expert advice and end up with a more efficient IT setup that saves you money.