From Startup to Exit: How Non-conventional Funding Can Help at Every Stage of Business

Every entrepreneur steps into business with a clear vision in mind. This vision is often fed and manipulated by managing and prioritizing the use of available financial resources.

The three main sources of funding for business are:

  • Revenues from business operations,
  • Investor finances such as owner’s, partner’s, or Angel/venture capital, and
  • Loan from individuals, business loan or personal loan for businessmen from banks and financial institutions.

Each company has to go through various stages. That’s the business lifecycle. And each of these stages is unique. Therefore, each stage needs a different funding strategy.

To identify which funding strategy is better for each stage depends upon:

  1. What stage your company is in?
  2. What are your funding options?

Many entrepreneurs of today find the non-conventional sources viable to grow their ventures. Let’s have a look at some of the funding methods at each stage you may want to explore further.

  1. Startup Stage.Most entrepreneurs use their savings, personal loan/personal credit line or credit cards as their seed capital.

They may turn to their family and friends for finance. Some may convince Angels or VCs to fund their startup vision. And quite a few of new age entrepreneurs may look for a newer option of crowdfunding.

     2. Growth Stage. Some companies may function at a large profit margin.

This means that they have the luxury of allowing the fund to grow organically without needing outside capital. If your company achieves a net margin of 30% or more, it can sustain a vigorous growth rate.

But if your business is growing fast with a net profit of 5% (which is low), you could see yourself shutting shop soon. How? Your company growing at a fast rate with low margins of profit will make your cash flow dry up.

During this stage, many entrepreneurs find ways to avoid and resolve cash crunch in business. They may take on debt to grow inventory, expand production capacity and cover operating expenses. Some may bring on equity partners. Many may meet their financial needs from larger venture capital funding.  

Companies might also use venture capital or angel investors to fund this stage so they can move to the next stage.

  1. Maturity Stage.This stage sees slow growth.

Things start to change. Your competitors may start to gain your market share. Your customers’ demands may evolve.

The funding issues at this stage are more about the future direction of the company and less about where to get the capital from.

Business owners may have to make tough decisions during this stage.  

  • Should they use their cash flow to run their operations and see it shrinking?  
  • Should they invest the cash available into other ventures to diversify their risk? OR
  • Should they think of an exit strategy?

Continue with business? Diversify? Or exit? Tough decisions to make at this stage.  

  1. Liquidity Event.This is a critical decision point.

Although there may be additional financial options available to you which were not available in the earlier stages, you may decide to exit through an acquisition or a merger with another company.

At this point, if you decide to liquidate, a leveraged buy-out, selling to a private equity firm, and going public are good examples of exit strategies.  

  1. Decline Stage.In the decline phase, the company begins to have limited funding options. Credit line/personal line of credit begins to shrink, investors withdraw and take their money elsewhere, and hired talent leaves for better prospects. Distress sets in as leadership fails to admit that their business is failing.

If the business continues to be in a denial mode, it could be too late to turn things around. The company could die.  

However, proper funding strategies at each stage of the lifecycle can improve fiscal health and extend the life of the business.

Find a better way to do business with MoneyTap’s personal line of credit for business

Every stage of the business lifecycle is challenging. A solution that worked well for one stage may not work in another stage. That’s why you need to tweak your business plan and operations accordingly.

Having said that, a ready cash line to support you through every stage of the business lifecycle is recommended. A personal line of credit can help you get access to funds to finance your business decisions and help you do business better. MoneyTap can provide you with the comfort of having a personal line of credit for business 24/7.  

What can Moneytap’s personal line of credit for business offer to you

MoneyTap’s personal line of credit for business can support you at every stage of the business lifecycle.

The benefits of taking a personal loan to fund your startup from MoneyTap are as follows:

  • Personal Loan for Self Employed– no collateral and guarantor required.
  • A faster approval process – get your personal line of credit for business approved in minutes.
  • The flexibility of loan usage – use it for any purpose you deem necessary.
  • Borrowing options according to your needs – borrow from ₹ 35,000 to ₹ 5 Lakh.
  • Withdraw as low as ₹ 3,000 and as high as your approved limit – pay interest only on the amount used from your credit line.

At each stage, your business will need to rely on a financial source to help overcome the challenges. MoneyTap can be your financial source. With its active credit line, you are better prepared to take on the financial challenges of every stage of the business lifecycle.

Author bio:

Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at [email protected].

From Startup to Exit: How Non-conventional Funding Can Help at Every Stage of Business
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