Miscellaneous

Ask the Expert: How do I finance my company after launch?

Kaitlyn Wightman
Kaitlyn Wightman

There’s a lot of information out there about raising money for your business before you open your doors, but what about after you launch your company? What financing options are open to your business then? And does your company really need outside financing at all?

We asked business financial expert Geri Stengel. She’s the Founder and President of Ventureneer, a digital media and market research company, as well as an active advocate for startups, nonprofits and growing businesses.

With decades of experience in entrepreneurship, marketing and business financing, we asked her our most pressing questions.

We’re really excited to talk to you today.

I’m so glad! Thank you for inviting me.

Let’s jump right into it. While it’s not a right fit for every business, many startups and small businesses can greatly benefit from financial backing after a company’s grand opening. When is it right for a launched company to seek out financing? Is it just for startups?

There are various times in a company’s lifecycle that you may to want to look for financing. You may need it at start-up phase, growth stage or even to meet everyday cash flow challenges.

The type of financing you pursue will depend on how fast you want to grow, the purpose of the financing and if you are willing to give up some control of your company.

After a company launches, do their financial options change?

A company has both debt and equity options It’s going to be easier as your company matures and becomes more established to get traditional debt financing from a bank, which will be lower cost than equity or online marketplace lenders.

What factors influence the types of financial options for a business? For example, does a company’s industry, size or location impact their financing options at this stage?

It absolutely does. Again, the longer you’ve been in business or the larger your company, the more likely you’ll be able to get a bank loan.

The larger banks will definitely be more favorable towards certain types of industries. They may look less favorably at a tech company or a startup because they’re scaling and they may not be profitable. So companies that are profitable are going to be more appropriate for debt financing.

Do businesses have other financing options such as crowdfunding?

I am a huge fan of rewards-based crowdfunding at any point in a company’s lifecycle, for startups as well as at any stage that a company launches a new product. In fact, even Fortune 500 companies are using crowdfunding not because they need to raise money but for market research purposes.

A great example of this is the smartwatch company Pebble. Their first crowdfunding campaign raised $10 million three years ago and last year they did one that raised $20 million. So anytime that you want to pre-invoice your product, rewards-based crowdfunding could be the right financing option for you.

Who should a business talk to about their financial options at this stage? Should they go right to the bank or have conversations with other kinds of financial advisors?

Your banker may understand debt options, but I don’t know to what degree they’d understand your other options. That’s why you need a savvy accountant, one that is a strategic thinker rather than a bookkeeper, to help you think through the financing options available to you.

You also need to talk to your lawyer who specializes in financing. The right kind of lawyer is key, especially those who fully understand the investment crowdfunding options, such as Title II, Title III and Title IV of the JOBS Act and intrastate crowdfunding.

You will need to do your own research, and it’s easy enough to do that on the internet. You’ll have to understand the basics of “is my company more likely to be equity funded or debt funded?” Whether you are a startup or a growth company, both options exist throughout the lifecycle of a business.

Aside from financing, what resources are available to businesses to help keep them on the right track after their business starts?

It’s advice. You need professionals like a lawyer or your accountant to help you define your best options in terms of financing. You also need to seek out mentors, advisory boards and peers. For example, join a peer advisory group such as a Women Presidents’ Organization, Entrepreneurs’ Organization or Young Presidents Organization. You can build a brain trust that can help guide you.

One entrepreneur that I wrote about who was launching her business sought the advice of her mentor to determine if she should raise money and which type. She raised angel financing.

There may be other reasons that you need outside funding, such as to pay for inventory. That would more typically be debt financing, but if you can’t get that financing, you could certainly do equity crowdfunding.

Another entrepreneur I interviewed raised money through CircleUp to fund her inventory when she couldn’t get a bank loan.

What do successfully launched businesses do to stay on track?

They look at their financials on a monthly basis. They’re creating a dashboard so that in addition to financials, they know what the other metrics are that are driving their business. While that’s going to differ from company to company, they know what they want to measure and track it.

What is your best piece of advice to a business owner who has just launched their business?

Know your options. Learning about financing is critical for your business, especially the difference between debt and rewards financing. It’s very important to keep a dialogue open with your lawyer, your accountant and your mentors so that you’re always aware of your options.

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