Top ways to fund your business expansion yourself

by Ashvini on January 27, 2011 · 7 comments

in Entrepreneurship

Okay, you have started your own business. It has worked perfectly till now. You have got customers who are regularly purchasing goods and services from you. The last year was good and you decide to make this year better.
However, you also realize that the new year will bring new problems. Your business needs to grow. However, competitionĀ  has grown too and there are many players in your business now. You need to expand your offerings for your customer.

Also, your customer list is growing and you need more employees to tackle their demands. This is the time when you are going to be stretched. Since you have limited amount of money, you will probably turn to an external source to fund your expansion, primarily venture capital funds. Unfortunately, they take a lot of time to decide on your application and your business cannot survive till that time. How do you expand your business then with no money?

There are no easy answers to how to raise money, when you are in need of working capital or money for expansion plans (for e.g. to buy new machines).

Let us list out some of the options that you have to keep your business going while your application is processed by venture capitalists or angel investors.

  1. Use your own savings:
  2. This is the most obvious answer. If you do have some savings that you may use, go for them. After all it is your own business. Fixed deposits, unit funds in your name, bank deposits can help you manage your fund requirements. If you use your money, you will not have to either part with company equity or pay high interest rate on loans from bank. Beware that you replenish your account as soon as you start recovering the money that you invested.

  3. Friends and family:
  4. Get in touch with your family. Fix meetings with the uncle whom you know has some money to spare.

    Give them the outline of business. Tell them why you need the money and when will you return it. Do not borrow heavily but only that you can pay back if things don’t work out.

    Be sure to payback because you don’t want to look bad in the family. You may also offer your friends or family a part of equity as return for money. If they trust you well, they might agree to your request

  5. Contact your bank:
  6. If you have been maintaining good relationship( for e.g. maintaining a good balance or good payment history) with your bank long enough, you might get a loan from there.

    Make a business plan and ask the bank for working capital or money for expansion. Create a great impression about your business. If your bank likes your business, it might be willing to extend a helping hand.

  7. Look for Governmental programs
  8. These days governments of many countries are very open to funding of entrepreneur start-ups. One of such program in India is called as CGTMSE. Definitely, your state/country too would have such programs. Talk to those that are in charge of such schemes. If you can convince them, you might get funding from government free of any collateral.

  9. Generate cash internally
  10. By managing cash flow and good planning, you may generate cash internally that you can use to fund the expansion. A lot of company use cash generated by payments from customer and internal saving to fund other activities. Curb wasteful expenditure and save money for your company’s future needs.

  11. Talk to your vendors
  12. Ask your vendors if they accept delayed payments. Explain your expansion plans to them and how they would fit in. Ask for their cooperation. If they give you credit for a longer time, you have more cash to invest in your business.

  13. Ask your customers for advance
  14. If you have good relationship with your customers, you may ask for an early payment for e.g. as an advance for your services. A customer might be willing to pay if you have provided consistent, high quality services previously. Offer to provide discounts, services for free, later on, when you are awarded the next contract.

    If you think smartly, there are many ways to get cash for your business expansion. The key is to plan ahead and think of how much money you will need for it. Do it slowly and in a correct manner, your business wll attract money without you asking for it.

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{ 7 comments }

Shrinath Vashishtha January 27, 2011 at 3:39 pm

Nice fundamental tips for budding entrepreneurs, these, dear Ashvini, that work at any stage of the business, if made prudent and professional use of! Keep the good posts coming. Cheers & God bless! :-)

Ashvini Kumar Saxena January 27, 2011 at 4:11 pm

Thank you Shrinath for reading and taking time to comment. I appreciate.

Shrinath Vashishtha January 27, 2011 at 9:46 pm

Pleasure’s mine, dear Ashvini! I’m glad I could return to your good blog soon, as I had promised the other day. Cheers & all the very best! :-)

Alka January 27, 2011 at 3:13 pm

Great advice again….I do not have a business of my own but even in life one should have a plan and savings for the rainy day.

Ashvini Kumar Saxena January 27, 2011 at 4:10 pm

Alka, really glad that you liked it. Thanks for commenting.

Aswani January 27, 2011 at 11:04 am

Brilliant tips once again. Well, not sure but I will makes use of these tips in future if I have any such plan to go ahead with my startup. And I will also recommend these tips to my friends. For me, it is mostly like money saved is money generated which then can be utilized with the business expansions…

Ashvini Kumar Saxena January 27, 2011 at 2:51 pm

Thank you Aswani once again for your comments. Saving money and using it is perhaps the best way, hence it is on top of my list.

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