How Businesses Reach New Levels of Success
Every small business owner sets out with the aim of turning the business into a reliable income source for him and the employees. The lack of sufficient capital to grow the business is, however, a major constraint. While most entrepreneurs are skilled in starting successful small companies, growing them to a company that is financially stable is a more difficult task, necessitating the raising of growth capital.
Defining growth capital
Most business owners make a costly mistake of not differentiating between working capital and growth capital. While working capital is used on the business’ cyclical expenses such as bills, growth capital is not related to any business cycle. Instead, it is needed when the business owner decides to make a major change such as business expansion, change of location, or a merger with another business. Without growth capital, it is impossible for any business to grow beyond its day to day tasks.
How can a business obtain growth capital?
1. Angel investors
Also known as informal investors, this type of an investor funds the business due to a connection with the business or its cause. Often, this may be the business owner’s friend, relative or any affluent individual willing to fund the business to obtain some ownership equity. They offer more favorable terms in comparison to other lenders as supply money to start-ups to get them through the initial difficult stages rather than based on the business’ viability.
2. Venture capital companies
These are the opposite of an angel investor. Instead of an individual investor, this involves a firm whose members are professional investors who fund businesses with high growth potential in exchange for some shares in the business.
3. The business owner
Funding your own business has a two-fold effect makes you strive towards the success of your business. It also shows other investors that you believe in what you are offering. Besides, funding your business keep you from repaying loans with high interests.
Are you in need of any advice regarding growth capital? Wexum can help you out. Contact us today.