Are you turning away work and finding it tough to keep up with demand? Are you working 24/7 to get the next project completed or shipment delivered? Is your space getting too cramped, or are you using outdated equipment? Do you have ambitions to expand your business?
If you answer “yes” to any of these questions, it could be time to invest more money in your business. A cash infusion can help you hire new employees, buy new equipment and inventory, or expand your physical space, among other things.
Recognizing that it’s time to put more money into your business is the first step — and a big decision. Now you need to think about where you’ll get the funds.
Businesses have a number of options when it comes to funding. Where the money comes from could significantly affect how your business grows, so you need to evaluate each option against your own business plan and goals. Below are a few options, but you should do your own research to determine what will work best for you and your business.
Learn more about Square Capital.
Get a loan to grow your business.
Reinvest profits in your business.
How much of your profits do you reinvest into your business annually? While the experts may not agree on an exact amount (some advise reinvesting as much as 50 percent of annual earnings back into a business), if you’re already operating profitably, why not plow that money right back into your business to make it grow more?
Just make sure to triple-check your budget and revenue projections before reinvesting your profits (and keep some cash on hand for unexpected emergencies).
Take out a small business loan.
If you’re looking to fund a larger project — like renovations or equipment — a small business loan might be the way to go. (Here are five ways you might use a small business loan.)
You might apply for a traditional small business loan through a bank. But be aware that this route often has a more time-consuming application process that may require a variety of supporting documents.
In many situations, business owners may find that taking a loan through an online lender (sometimes called an alternative lender) is simpler, faster to get, and more flexible than other funding options — and it’s becoming more popular.
With Square Capital, the application process takes just a few clicks, and upon approval, funds can be transferred into a borrower’s bank account in as little as one business day. Over the past two years, Square Capital has helped over 130,000 businesses grow with more than $1.5 billion in financing. And 84 percent of business owners who obtained funds through Square Capital say that the money helped them to increase sales or revenue, according to a 2017 survey by Square Capital.1
Apply for a business line of credit or business credit card.
Business credit cards can be a good option for short-term financing. So it shouldn’t be surprising that 67 percent of small business owners have a business credit card, according to creditcards.com.
Business credit cards are a fairly accessible form of credit — you’ve probably received a bunch of offers by mail already — but whether or not you are approved and the rates you are given often vary based on the terms of the card and your business’s credit situation. And accumulating credit card debt could be more expensive in the long run than a small business loan (if the rates are high or you don’t pay it off quickly) .
A business line of credit is also an option for rainy day funds and unexpected expenses. A line of credit, however, may be more difficult to qualify for than a business credit card. It sometimes has stricter credit requirements, but often has lower pricing, which makes it a good fit for a healthy business with higher credit scores.
Whether you’re thinking about a business credit card or a line of credit, you want to evaluate the terms and conditions you are given to make sure it is the best decision for your business.
Use your personal funds (self-funding).
Using your personal savings to help grow your business is another option. You’ll want to think through the personal and business risk you would take on before going down this path.
Ask your friends and family.
Have your friends and family shown an interest in helping you meet your small business goals? If so, this could be the perfect opportunity for them to help fund your business growth. Investing their cash in your business could help with renovation costs, expansion costs, or even research and development for new services or product lines.
If you go this route, you may want to think about questions like:
- How involved will your friends and family be in the strategic and managerial decisions?
- Will this change the way your business is structured?
- What does repayment look like?
However you decide to structure it, work with a lawyer to put the agreement in writing.
These are some of the more common ways that businesses find funding. You might have other options available to you as well. Make sure you consider the pros and cons of each source — in light of your business’ specific situation — before choosing the one that best achieves your goals.
1This online survey of 7,000 Square sellers who have accepted loans through Square Capital was commissioned by Square Capital and conducted by Qualtrics. The survey has an overall margin of error of 1–2% at 95% confidence interval. Participation in the survey was optional and all data was self-reported by study participants. Responses and insights gathered were shared with Square Capital in an aggregated and anonymous manner. Respondents participated in the study between January 9–11, 2017.
Square Capital, LLC and Square Financial Services, Inc. are both wholly owned subsidiaries of Square, Inc. Square Capital, LLC d/b/a Square Capital of California, LLC in FL, GA, MT, and NY. All loans are issued by either Celtic Bank or Square Financial Services, Inc. Square Financial Services, Inc. and Celtic Bank are both Utah-Chartered Industrial Banks. Members FDIC, located in Salt Lake City, UT. The bank issuing your loan will be identified in your loan agreement. The individual authorized to act on behalf of the business must be a U.S. citizen or permanent resident and at least 18 years old. Loan eligibility is not guaranteed. All loans are subject to approval.