Starting and running a successful business requires more than just an innovative idea – it requires sustained effort, hard work, and, perhaps most important of all, adequate funding. Without sufficient capital, the growth and sustainability of a startup could be compromised, potentially preventing it from ever reaching its full potential.
Whether it comes from personal funds, venture capitalists, angel investors, government grants, business credit cards, online lenders, a bank loan or any other source, proper startup funding can be the difference between success and failure. In this blog, we will discuss precisely why securing funding is crucial for small business startups and what the best startup financing solutions are.
What Exactly Constitutes a Start-up
This is a crucial point to begin with to help provide context when it comes to choosing the right type of financing for your business. While opinions of what “counts” as a startup varies depending on who you ask, and there is not a definitive or universal cutoff, there are still guiding factors for what businesses can be (or still be) considered a start-up. A business can be be considered could be considered a start-up whether it’s been open a few months, while other opinions indicate upwards of three or five years. Other factors to consider can be revenue and the state of the business. For example if you’re still hiring fundamental team members this leans more towards start-up than established small business.
So what’s the difference between a startup and a new small business? Again, that probably depends on who you ask. For some those two terms may even be used interchangeably. Two major factors to consider are short-term and long term intent. Typically start-ups are seen as market disruptors, providing a new product or service that is shaking up existing norms. Startups may face explosive growth from the start, or they may experience a slower burn where it takes a while to build momentum. Small businesses can be seen as more traditional with a steady increase, often with the long-term success of the business being a priority, rather than an initial skyrocket in value. Moreover, some uses of the terms indicate that once a start-up has achieved consistency, then it simply transitions into a small or medium business.
But again, the challenge remains, that if you had a group of people all in the same room and asked them to define a startup, you would likely receive as many different answers as there were people in the room. For the sake of this blog, the intention of the use of the term start-up is focused on the newness of the business.
Securing Proper Funding Can Make or Break a Startup Business
The sobering reality of startup businesses is that they are very risky and just as likely to fail as they are to succeed. Even if based on a great business idea, many startups fail due to lack of financing and investors. This is why it is imperative for entrepreneurs and those looking to start a business to have a business plan that includes a strategy for securing adequate funding.
New small business owners must be careful, however, because funding-related pitfalls can be multifaceted. According to Forbes, another challenge startups face is securing funding without sacrificing focus on their product. As such, the real difficulty founders face when running a startup is the dual responsibility of managing the business operations and raising capital for ongoing growth simultaneously. Balancing both can often feel like having two full-time jobs, and with looming financial pressures, it is easy to get caught up only worrying about funding.
Nevertheless, new business founders should be mindful to not sacrifice their company’s development while trying to raise funding because any smart investor would expect to see tangible progress before getting involved. Entrepreneurs therefore not only need a method of financing that will give them access to enough funds, but also one that is quick and easy.
Furthermore, business founds should have the choice between having to sell part of their company, and consequently have to take into consideration additional opinions on the direction and future of the business, versus using alternative financing options which leave the owner as the proprietor.
Startup Business Financing Options
As we’ve discussed, there are many financing options available to young companies. Many of these financing solutions involve drawbacks, such as long delays before you receive your funds, having to give up equity in your company, high interest rates, or pressures to immediately produce greater returns (like with venture capital and angel investor agreements), but there are two financing options that sidestep these hindrances: fixed financing and business lines of credit.
Fixed Financing
Fixed-rate financing solutions are an ideal financial product for small businesses that can provide them with access to up to $500k in funds. Not only are they quick and easy to set-up, but they operate with the predictability of fixed-rate loans, allowing business owners to better track their cash flow by budgeting for their repayment obligations on a daily or weekly basis. This ensures their payments are constant and reliable, making this product an excellent choice for companies with steady income streams.
Fixed financing presents small businesses with an alternative to traditional business loans that is specifically tailored to their cash flow needs. The upfront cash provided and the fixed daily or weekly payments allow a degree of convenience and control not offered by variable interest rates. This flexibility is advantageous as it helps businesses plan their monthly expenses and future cash requirements reliably.
Instead of the lengthy application process associated with a loan from a banking institution, fixed financing provides convenient and swift access to capital. With the stability of a traditional business loan, business owners can use it to purchase essential equipment, increase their staff size, or cover necessary expenses while expanding their operations. It is the perfect tool for small businesses looking to acquire funding to help secure their place in the market.
Business Line of Credit
A small business line of credit is a popular choice among small business owners looking to access capital in a cost-effective and flexible manner. With easy access to cash, businesses can quickly take advantage of new opportunities and remain competitive in the marketplace.
With adjustable repayment terms and interest charges that only apply to the amount borrowed, this credit facility offers businesses a secure way to finance their operations and create financial stability. This type of financial product enables small business owners to manage their finances more effectively while ensuring they have the financial resources they require when needed.
Business lines of credit are an attractive financing option for small business owners due to the cost savings and convenience that they offer. Unlike loans from traditional financial institutions, which require structured payments, a line of credit opens up borrowing capability and gives the business owner the flexibility to borrow as the need presents itself.
Business lines of credit can be a great resource for small business owners looking to access capital without locking themselves into loans with higher interest rates or costly credit card payments. Provided they remain disciplined and only draw on the line of credit as required, owners can benefit from flexible, low-commitment financing options that can cover a range of expenses from inventory purchases to emergency costs.
Business lines of credit also pair well with other forms of financing, allowing businesses to supplement other products such as fixed-rate funding and further meet their short-term and long-term financial goals.
Merchant Growth Helps Businesses Access the Funds They Need
At Merchant Growth, we have experience working with a wide variety of businesses across a wide variety of industries. Whether you operate a location, are focused on e-commerce, or operate in the professional services space, our financing can be used for what you need it for.
With quick turnaround times and flexible financing options, Merchant Growth is one of the top alternative financiers in Canada. Our minimum eligibility requirements are simple and straightforward: be located in Canada, be in business for at least six months, and have monthly revenue of $10K. Beyond that, our capacity to provide solutions tailored to your business needs, and financing amounts up to $500k make us worthy of consideration in any small business financing conversation.
To learn more about our different financing solutions, contact us to work with a dedicated financing advisor. We are ready to provide you with the most convenient and accessible financing experience on the market and give your business the help it needs.
