5 tips for securing the capital you need to scale your business

For any small business, securing the capital necessary for scale is a challenging but essential endeavor. With seemingly endless funding options, each presenting unique advantages and challenges, understanding them all and selecting the right one for your business is crucial to fueling growth.

Across this diverse funding landscape, invoice financing and Revenue-Based Financing (RBF) have emerged as compelling choices for their adaptability to business performance. 

In this blog, we provide five key tips for securing funding. From understanding various funding options to preparing for investor scrutiny, these tips are designed to help you navigate the complexities of raising capital and harness the full potential of innovative financing solutions.

Tip 1: Understand your financing options

The first step in securing capital is to understand the range of financing options available to you. Each funding route, from traditional bank loans and venture capital to modern methods like invoice financing and Revenue-Based Financing, has unique characteristics that cater to different business needs and stages.

Invoice financing can provide immediate access to cash, by lending against new invoices. Up to 90% of an invoice’s value can be advanced within 24-48 hours. Unlike traditional loans, which often require collateral and rigid repayment schedules, invoice financing is directly tied to income, making it a flexible option that scales with your business activity. 

Revenue-Based Financing, meanwhile, is a strong proposition for businesses with regular revenue income streams. Repayment terms are tied to sales revenue and provide a flexible repayment schedule that grows with business performance. This coupled with faster access to cash, is beneficial for businesses who experience periods of fluctuating income.

When evaluating financing options, consider factors such as the stage your business is at in its journey, the precise amount of capital you need, and how different funding models will impact your cash flow and ownership status.

Understanding these elements will help you choose a financing solution that aligns with your business's growth plans and overall financial health.

Tip 2: Prepare a solid business plan

When seeking funding, a well-structured business plan is your route to success. It's a resource that clarifies your business vision and strategy and demonstrates the viability and potential of your business.

Key components of an effective business plan should include:

• Detailed market analysis

• Clear description of your business model

• Outlined growth strategies

• Realistic financial projections

• A specific plan for how the funds will be used.

This level of detail is crucial to demonstrate your venture’s worthiness.

Tip 3: Showcase your business’s revenue potential

Showcasing your business's revenue potential is vital. Investors are drawn to businesses that can demonstrate an ability to generate consistent and growing revenue as their returns are tied to your sales performance.

To indicate your revenue potential effectively, be prepared to show:

• Historical sales data

• Details of customer acquisition strategies

• Evidence of market demand for your products or services

This information collectively paints a picture of your business's capacity for sustained growth and allows you to share how you’re able to sustain and increase your revenue streams.

Tip 4: Build a strong relationship with your financier

Building and fostering a strong relationship with a potential financier can be a game-changer in the pursuit of funding. A relationship built on trust and a clear understanding of your business goals and needs can drive valuable returns..

Engaging with a potential financier can involve attending industry events, leveraging your existing business networks, or simply picking up the phone and starting a conversation. When contact is made, remember to be transparent about your business objectives and how you intend to use the funding, as this further establishes credibility and trust.

Maintaining ongoing communication with your financier is crucial. Keeping them informed about your business performance and growth challenges will help maintain the type of positive and open relationship that’s so essential for long-term success.

Tip 5: Be prepared for due diligence

Due diligence is an integral part of the funding process. Financiers will examine your business, including financials, business models, and growth plans, to assess the viability and potential of your venture.

To prepare, ensure your financial records are in order, ensure you can articulate your growth strategy, and have clear answers on how the funding will drive revenue growth. The more prepared you are, the smoother the process will be.

Effective preparation for due diligence will not only increase your chances of securing funding but will also strengthen your overall business strategy. As an exercise, it forces you to evaluate your business, leading to improvements beyond securing finance.

Empower your business’s growth journey

Securing the right funding is crucial if scaling your business is the objective. However, it’s important to remember that your chosen financing option should align with your business’s unique needs and growth objectives.

Invoice financing and revenue-based financing, with their flexibility relating to business performance, are a route many growing businesses are exploring in increasing numbers.

Whichever option you choose, equipping yourself with the right strategies and an understanding of innovative financing solutions will mean your business is well-positioned to scale new heights and achieve long-term success.

Find out more about how Stenn can help you scale your business.