As many of you know, a few years ago, I had co-founded an Auto-CAD outsourcing business. I provided some of the initial funding for things like web design, initial advertising, initial hires, computers in the Philippines, etc. However, we were treading water for a while and not really growing. That’s where some funding infusion came in. We happened to have an old college buddy that pitched in tens of thousands of dollars to really blow out the opportunities. This allowed the other founder to quit his job and go full-time to really manage large clients and give the business an air of professionalism and legitimacy. It’s really hard to convince large corporate clients that you’re serious if it’s a gig you’re only running on the side at night and on weekends. So, this made all the difference and helped turn the business into what it is today – a Million Dollar revenue company.
Business Line of Credit
The reality is, most folks don’t have a benevolent uncle or friend who’s willing to put that kind of money at risk for an unproven business where the return on investment may be years off. However, there are options. Getting a business line of credit can allow a typical business owner to quickly secure the funding they need to increase scale and invest for the future. Every case is different and interest rates would typically be commensurate with the risk, but if it will allow you take your business to the next level, why not take a look? The worst that happens is you decide the terms don’t work for you.
How Businesses Grow
True, many businesses grow organically and start from a small base. But they often grow much more slowly than they would have if you started with scale from the early stages. As a business owner who may be on a single income and only so many years left to work, do you really want to wait decades to realize the potential your business possesses? Oh, and I forgot to mention, in the case of my AutoCAD outsourcing business, in order to secure that substantial funding from our friend, we also gave up a large chunk of equity in the company to do so. That was the tradeoff. In the case of a business line of credit, the creditors are looking for interest rates to compensate their risk, not necessarily a stake in your company. So, when all is said and done – if and when your company is successful, you still own the equity.