Every business owner should want his/her business to grow, remain strong, and prosper, right? While there are many challenges to achieving sustained and healthy growth. One of the foremost challenges is securing adequate growth capital.
What is Growth Capital?
Growth capital is capital that is intended to provide long-term growth and health for a business. It is used for business expansion, adding new products or services, adding a new location, and acquiring another company. It is different from working capital which is used to pay for day-to-day operating expenses.
Sources of Growth Capital
Private equity financing can be advantageous for a business. Unlike debt financing, it does not add any liabilities to a balance sheet and doesn’t negatively impact cash flow. The potential downside is that private equity financing requires giving up some control of a company. There are two forms of private equity financing:
The first is venture capital. Venture capital firms invest in and provide growth capital to businesses on behalf of their clients and require some equity in exchange. The venture capital company may also want a representative to sit on the board of the company to provide advice and support for the direction of the company.
The second is angel investors. Angel investors are usually wealthy individuals who seek specific types of investments. They may also want to sit on the company’s board to help guide the company as it grows and to protect its investment.
Other sources of funding to provide growth capital are:
• Personal funding. This can come from retirement savings or other sources of personal equity.
• Family and friends. This is used frequently but it comes with some potential relationship challenges.
• Traditional term loans or lines of credit. This type of funding comes from banks or credit unions.
• Alternative financing is a growing source of funds from lending specialists.
Seek Expert Financing Assistance
Contact Critical Capital Solutions for customized tailored financial solutions. We provide a wide selection of financial products so you can get the growth capital you need.