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Common Reasons Businesses Seek Funding

Starting your own business is never easy. Even the best ideas have a hard time making it through the initial period of development. This is mostly because of the competition that will fight back and try to keep their share of the market. That is where funding comes in handy to help the little guys out. Startup companies rely on funding to kick start their business and grow. Even after the initial starting period, a lot of times businesses rely on outside funding to make it through hard times or make use of favorable market opportunities. Here are a few of the most common things companies use the funding for:

Common Reasons Businesses Seek Funding

Starting up

The initial starting phase is the most crucial period of any business, when entrepreneurs, after months of planning, finally decide to take action they need to make sure that everything runs smoothly. Finding the right office, buying equipment, educating new employees and implementing a marketing strategy, all these things require time and most importantly ‒ money. That is why funding is crucial at this stage. Imagine having a great idea and the perfect plan to execute it and it all fails just because you didn’t have enough money to see it through? Sadly, this is the period when money is hardest to come by as a lot of investors will be reluctant to invest in an idea that hasn’t been at least partially realized.

Growth funding

There is a natural growth that comes from running a profitable business. The more money you start making the more you can invest in expanding your company. However, this natural growth tends to be relatively slow and, oftentimes, additional funding is required in order to take a business to the next level. A large portion of the money that a business generates from sales is used for day-to-day operations and employee salaries. Because of that, not much can be put aside that can be invested in the future, so outside money is the only solution. Getting funding at this stage used to be really hard if your credit score was not perfect. Luckily, the lending industry has evolved and affordable bad credit loans are available to help businesses get additional funding for expansion. Repayments can be set up to be in step with the pay cycle of a company, which makes this option easy to manage and repay.

Business Funding

Making property investments

Most businesses start out leasing their office. In fact, this is one of the biggest expenses that startup companies face throughout their life cycle. A good way for companies to remove these costs is to invest in their own property. Buying property is almost impossible for most small to medium sized businesses and the only way to do so is through additional funding. This, however, is a very profitable move for any business that can acquire the required funds. Property prices are relatively stable and most of them even go up in value. So, buying property is one of the most profitable investments in the long run even if, at some point, business needs to move to another office or even close completely. The property remains as capital and can be used to generate profit through renting or it can simply be sold.

Marketing and PR

Even the best product won’t achieve high sales results if no one knows about it. With the market saturated by an ever-increasing number of new products, it’s really important to stand out and get noticed by your targeted audiences. Sometimes companies are too focused on the product and later realize there is no money left to get the news out to the customers. In such a case, additional funding is required to get a proper marketing strategy going. The same applies to companies which have been around for a while but are coming up with a fresh new idea. If the investment in the new product was too high, then the company might seek additional funding for the promotion of the product.

These are some of the most common reasons businesses get additional funding. There are countless other examples of a company needing more money in order to grow and move their products. Just doing things without outside help isn’t sufficient in a competitive market. Thankfully, borrowing money has become easier and faster with a lot of different repayment options.

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Lynne Huysamen

Mommy to a pigeon pair, blogger and online marketer. Lover of chocolate, good books and buckets of coffee.

4 Comments

  1. I would definitely think that the advertisement realm of things would require a good deal of funding, if not more than normal due to the fact you pointed out that no one is going to purchase an unadvertised product. It just won’t happen if no one knows the product exists. It’s interesting to see how companies break their funding into growth and property investments, with hopefully enough money to carry over into the marketing and public relations department. 

  2. I don’t really know how else a startup business can survive without funding. If the business is an online business then there is a chance it might not need funding. Although this is not always the case and a perfect example of this is facebook. Before facebook could become what it currently is it was funded by people that believed in the idea behind facebook. If facebook wasn’t funded I really doubt it would be what it is today.

    Most offline startups that really know what they are doing are always interested in looking for funding or sponsors because it is the fastest way their businesses can grow to become more than what it is.

  3. You are right, securing sufficient funding is a problem most start-ups face in the beginning.

    There are various options, like banks, investors, grants or crowdfunding.

    Investing in property, in the beginning, seems counterintuitive. To do so you need even more funds on top of what you already require.

    Leasing or renting looks like a better option especially when the company is new and the cash flow is less predictable. However, if the company is up and running, investing in property could be the right move.

  4. Yes! I agree with your submissions here concerning the various reasons that business owners seek fundings. Getting started as an entrepreneur isn’t exactly a smooth ride. There would be various aspects to cover up with money especially when one is running a bigger concept. Like you rightly stated, one of the best things a business can do for itself is to secure a building for it’s smooth running as it would always safe that extra cost that comes at the end of every year. This is a great writing. Thanks

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