5 Equity Sources to Grow Your Business

If your goal is to continue with aggressive growth of your business and have exhausted debt, you will need to consider equity sources.

Equity funding can be an excellent option for many businesses. The specific type of funding an organization should consider will depend on the individual company, its growth, size, how willing the owner is to give away a stake and control in the company, and the short or long-term funding needed.

Inside this blog, we’ll discuss five external funding options that are available to organizations.

1. Personal Savings and Wealth

Personal savings is the quickest way to access additional funds when required. As a business owner, you also possess the most knowledge and confidence in your business venture and growth. Before investing back into your business, it’s crucial first to take a step back and look at your company and long-term plan through an unbiased lens. The last thing you want to do is put yourself at financial risk for a business that doesn’t necessarily show the returns needed.

2. Family and Friends

Generally, family and friends will contribute early to an organization’s growth. Depending on your personal relationship, they may buy-in quite quickly. While this may feel beneficial initially, you must consider how this may affect your relationship, not only in the present but the future. Consider the amount of money you realistically require. Not all friends and family will be in a stable financial situation to be able to provide you with the cash you need. If they are, you will want to consider your payback terms, and if you can give back their money in a timely manner, agreed upon by both parties.

3. Angel Investors

Angel investors typically invest in early-stage start-ups. They are commonly entrepreneurs themselves and have experienced the highs and lows that come with starting and scaling a business; they’ve also created a strong network in their respective industries, making their expertise extremely useful to the companies they invest in. In exchange for their investment, they can supervise the company’s management practices. When considering utilizing this route, look for partners that have strategic relationships that you currently don’t have access to, that could make a positive impact on future results of your business.

4. Venture Capital

If your business needs additional financing and you have high-growth ambitions and significant capital requirements, venture capital funding may be a route to consider. Venture capital investors are typically looking for companies in quickly growing markets with well-aligned management teams. When considering utilizing this as a funding option, it’s important to understand that venture capital funding tends to have stricter payback terms. Investors will generally seek equity ownership in the companies they fund. Typically, this is in the form of stocks or securities. This means that organizations that utilize venture capital must be comfortable with outside investors taking an active role in their management.

5. Initial Public Offering (IPO)

An IPO lists a company as an asset to be bought or sold on public markets, allowing companies to raise capital from public investors by giving up a percentage of ownership of an organization. The IPO process can take anywhere from 6 months to a year. During this time, it’s vital to work with seasoned professionals who know the ins and outs of the process. An IPO can be a significant opportunity for a company. Generally, this is a chance to raise a large amount of capital to ramp up growth and expansion. There is no set timeline for when a business is ready for an IPO. Depending on the industry, financial situation, liquidity, and other factors, a financial professional can help a business determine when to consider this path.

Depending on your company’s current situation, growth goals, and internal structure, which external funding option is best for you will vary. If you’re considering this route, it’s essential to talk to a trusted advisor who can provide you with the expert guidance you need to make the best decision for your business. Our years of experience across the diverse field of business at Part Time CFO can provide the strategic insight you need to scale your team and company. Reach out to us today!