How To Secure Funding For A Small Business?

Capital is the quintessential requirement that propels a business forward and allows it to achieve its target. Every company has its unique funding requirements that help it to stay afloat, maintain its cash reserves and reinvest in its processes. Thus, entrepreneurs need to identify how cash much is enough to run their venture successfully.

Small businesses need to be more careful with their capital as they need bigger amounts to grow and establish a substantial customer base. So, whether it is seed investment or funding for expansion, companies need a constant flow of funds to maintain their momentum.

Thus, entrepreneurs looking for businesses for sale in Perth must know about various sources of funding to maintain a positive cash flow and expand. However, they should keep their debts in check when taking out loans, or they can quickly translate into cash deficits. So here is how small businesses can secure funding to keep progressing in the best way possible.

1. Self-Fund Your Business

Bootstrapping is the most common funding method that involves financing your business through your personal savings. It does not require lending from a third party and there is no paperwork or collateral required. Many entrepreneurs also get funding from their family and friends, who can lend the amount at a much lower interest rate. It proves beneficial because there is no hassle or legwork, and you get immediate access to funds.

Small business owners in Perth usually prefer bootstrapping in the initial stages of the business because of the ease of getting the money. However, it may not prove helpful when the business is growing because it needs a higher amount. Also, some friends and relatives may only lend money in exchange for equity and there is the risk of relations turning sour if ideologies do not match in the long run and lead to disputes and litigations.

2. Accelerators or Business Incubators

The accelerator or incubator program is for start-ups who need support from the introduction stage of the business lifecycle. The initiative offers several advantages to start-ups, including business capital, co-working spaces, introduction and meetings with investors, business management training, etc.

Corporate partners work for these incubators to help start-ups find footing in the marketplace. They are dedicated to creating high-growth entities, and the start-up can stay with the incubator depending on its needs. The acceptance to the program is through an application process. If the business incubator finds the business scalable and viable, they provide all the support for growth, including funds.

3. Find Venture Capitalists

Businesses that are operating in a high-growth or risky sector usually get seed funding through venture capital. It is a pool of funds created by savvy investors who get equity in the business, which promises long-term growth. Most venture capitalists are interested in high-tech companies in the IT and biotechnology sector because of their high growth prospects.

Thus, entrepreneurs who wish to get funded by venture capitalists must know that they will want to generate a high return on investment and will demand returns. While seeking the funding, you need to look for venture capitalists and get them acquainted with your business plan to get the desired capital.

4. Liaise with Angel Investors

Angel investors are high-net-worth individuals who have operated in the same field in which they invest. They are like mentors for small businesses that need funding and valuable business advice to grow with their tutelage and financial help. These investors work alone and invest in several small businesses to earn a considerable return on investment. They also need equity in the business in exchange for the funding.

Small business owners must look for investors who have helped in the growth of other businesses in the past and have surplus cash for investment. However, the amount provided by angel investors is lower than what can be received from venture capitalists. The reason behind this is that angel investors work alone while venture capital offers a sum of the funds of several wealthy investors.

5. Government Grants

The state and territory governments in Australia provide grants, funds and support programs to small businesses. There are more than 700 grants and programs across the country that can be accessed through the government website and chosen based on the industry, location, business type, etc.

Businesses can submit their applications and get the funds needed to grow. Some of these grants include the Entrepreneur’s Program, which offers funding of up to $1 million to support small entities. Besides funds, this program also offers incentives and expert advice to innovate and grow in the field. Similarly, the Accelerating Commercialisation program also provides project funding of up to $1 million to help small businesses create a new product or service. Check the criteria for getting the grant and submit your application to make the most of it.

6. Small Business Loans

Most entrepreneurs rely on small business loans to secure funds for their companies. There are a variety of loan types provided by banks, such as loans with interest payments, loans with additional charges, etc. Entrepreneurs become liable to tax and GST implications when they borrow money to fund their businesses.

It is advisable to ask your accountant to find a business loan that matches your requirements and does not burden you with the repayment and interest rates. Some of the loans that business owners in Australia can access include a line of credit, commercial bill, rent to buy, chattel mortgage, invoice finance, overdraft facility, fully drawn advance, commercial hire-purchase and factoring.

7. Crowdfunding

Crowd-sourced funding involves securing funding for the business through donations, loans and getting cash in exchange for shares in the business. It is done online when the entrepreneur posts the business idea on the website and asks people to contribute funds for the business. The entrepreneur can put a cap on the amount required for the growth or start-up.

Crowdfunding allows the entrepreneur to interact with the contributors and get suggestions and ideas from them. Since it takes place online, it becomes easier to spread the word around about the funding requirement through social media. Also, if you are unable to achieve success, you would not be badgered as there will be no stakeholders.

Conclusion

Funding is a common requirement for entrepreneurs who wish to purchase a business for sale in Perth or launch their own start-up. They can utilise any of the methods listed above to secure financing for their business and make it grow. However, they must understand the terms and conditions and the impact of the funding on their cash flow before going ahead.