How to Fund Your Growing Product Business

One of the most vital things to pay to attention to when learning how to start a small business is finding a sustainable growth strategy. After you’ve launched your products, your efforts should be focused on how to get your business beyond sustainability and into an actual profitable and continuously expanding business.

There are many reasons to want to scale up your company. Perhaps your online business marketing tactics have gained traction and you need to expand your virtual staff to accommodate mounting orders and inquiries. Maybe you have introduced a new product line or bundled up your best-selling items. Now, more people have taken interest and you need to work on a bigger inventory.

Wanting to grow your business is easy, but when you’re actually thinking about funding the expansion, it gets daunting. Don’t banks impose strict rules and require difficult requirements? Don’t loan institutions take hefty amounts of interest and collateral?

The good news is that you don’t need to be at the mercy of these financing options. There are other funding options out there. Learn the pros and cons of each one so you can make a well-informed decision.

Here’s how to fund your growing product business:

1.       Work in Progress (WIP) Funding

WIP or Work in Progress is a financing option that takes a riskier position to support a company’s inventory production. Leland Capital Advisors and WIP-Funding are two companies that offer this kind of eCommerce support to entrepreneurs.

PROs:

Fast application and approval is expected. Work in Progress firms understand the time constraints involved in inventory production, so loan acquisition is quick. Entrepreneurs can also expect financing support from WIP institutions after establishing a working relationship with them.

CONS:

Because they take higher risks, WIP financiers often come with higher charges compared to alternative funders. They are also invested in a company’s growth so they require firm guarantees from the business owner.

2.       Equity Finance

The philosophy behind Equity Finance is simple: you sell a portion of your company to get cash infusion, which you use to fund inventory production and existing operations. Equity Finance firms such as Circle Up and 500 Startups are institutions that invest in such projects.

PROs:

You get the chance to work with strategic and experienced investors. Because you’re collaborating with people who are invested in your growth, you can expect a deeper level of commitment to your business.

CONs:

Equity financing works only one time. That is, if you want to take advantage of this funding method again, you need to share another portion of your company. Valuations are normally low, so if you want to get bigger funds, you also need to give up bigger company shares.

3.       Merchant Cash Advance

Technically, Merchant Cash Advance (MCA) is not a loan but an advanced and discounted purchase of your expected revenue. On Deck and Kabbage are firms that purchase a portion of a company’s future revenue to finance current inventory production.

PROs:

Quick approval process – most Merchant Cash Advance providers shell out funds within 48 hours of application. The qualification requirements are also more relaxed compared to other financiers.

CONs:

Steeper payment terms. Some MCA providers may go after your assets as guarantee for payment and so influence your personal credit.

You’ve worked on improving your product quality and now see the fruits of your labor through a surge in inventory production. Luckily, you’ve learned three alternative ways to fund your growing product business.