Financing Strategies for Every Stage of Your Business

Featured

Bootstrapping, seed funding, equity crowdfunding, Series A. These are common strategies for businesses to get funded. The key is to identify when is the right moment and what type of funding is proper to seek.

Stage 1: Startup
In this phase and with the idea a reality a business may exist, but owner is responsible for finding customers, delivering a product or service and making enough money to survive. Most business owners are bootstrapping their way to the next stage of growth, which is building the company using nothing but personal savings and cash from first sales.  In venture capitalist terms, this is the “pre-seed” stage of financing. Typicall examples are crowdfunding campaigns. Until the business idea is something customers want, it’s generally not a good idea to take out a loan. Angel investors and venture capitalists want to see some early business results before participating in a funding round.

Stage 2: Survival
The business idea is something that customers want and will continue to buy into. The challenge is to grow  to become a business with revenues, expenses, assets and employees.  It is one of the hardest phases for new ventures.  During this phase, business will be in the seed phase of financing, when business gather working capital.  Here are some quick ways:

Angel investor offers financial backing to small startups in exchange for equity.
Equity crowdfunding is to raise capital for securities, such as equity and revenue shares.
Grants apply from federal and state agencies, as well as private companies.
Micro-lenders or small loans (less than $50,000, like are offered by individuals).
In this stage is too early for an SBA loan, which meeting criteria is difficult, like number of years in business, a credit card score and at least $100,000 in annual revenue.

Stage 3: Success
When business can sustain itself profitably, it may have reached the success stage. Ventures are welcomed unless the contrary of the stage occurs, like a natural disaster, economic downturn.  Entrepreneurs use financing in this phase to fuel growth, including new product line/service, new location or grow profits. Investors seek business’s track record.

Financing options in this phase are as follows:

In Venture capital, Series A consists between $2 million to $15 million in funding.
This is the stage for an SBA loan.
Short-term business loans for equipment purchase or to increase working capital.
Bridge loans for working capital while seeking long-term funding.

Stage 4: Take-off
Entrepreneurs choose to become a big business or selling the venture to start a new one. The best funding is to engage with a venture capitalist for Series B and Series C funding.

On Series B, there is a demand of product or service, more market research and development. Funding ranges $7 million and $10 million.
On Series C needs more capital for scaling and to acquire or merge with same venture.
Outside of these series, there are Series D and Series E financing rounds with same goals (continuous growth).

Stage 5: Maturity
A mature business will have a challenge to control finances. this is the stage where initial public offering (IPO) opportunities come. It requires close to $100 million in revenue and takes years of steady growth, continuous improvement of business idea as well as progressive funding.

Small & Medium Enterprise

The financial management of the Small and Medium Enterprise is fundamental for the control and monitoring of its viability. Technical support and advice to facilitate the knowledge of a professional or business activity should comprise by the following setups:

  1. General Accounting Plan.
  2. Fiscal reports showing current company, offering solutions and alternatives to any economic difficulty to go through.
  3. Financial studies (investment, financing, operational, developmental –policies and strategies).

Preparation of feasibility projects

For professionals and companies that have staff that deals with accounting tasks, they in the need to possess:

  • A service of periodic review of accounting.
  • Support in the making of the annual closing.
  • Study of the advantages offered by Law in the application of deductions, bonuses and amortizations, to avoid paying more taxes on companies than strictly require.