Securing Growth Capital to Scale your Business to New Heights
It’s always a difficult decision to make for a small business owner, when considering how to secure funding for significant growth of the business. Many owners prefer not to apply for a loan which could make it happen, or to issue equity in the company, so they simply defer any investment until later. However, there are other sources of growth capital which can drive that desired expansion, including these described below.
Unlike venture capital firms, angel investors are individuals who invest in a small business because they have confidence that the business can grow significantly, and provide a profitable return on that investment. In many cases, an angel investor can help a fledgling company in other ways besides financial support, for instance by putting the company in contact with vendors, customers, and other investors. In return for their investment, angel investors usually require a seat on your company board, or at least to provide significant advice on the company direction.
If you agree to accept venture capital from an investment firm, you’ll probably be required to relinquish at least some share of ownership to the firm, because that’s what they will want in return for their funding. Venture capital firms find new companies to invest in on behalf of their clients, so they insist on part ownership as repayment, and this sometimes even includes placing one of their executives on your board. This is an excellent source of growth capital, but you will no longer have full control of your company if you accept it.
If other sources of growth capital are lacking, sometimes investment by the owner himself/herself is simply the only avenue available. While it’s a risky venture to put your own personal resources on the line, it might also be a positive signal to other reluctant investors that your faith in the company is so great that you’re willing to risk personal loss.