What Growth Capital Means for Your Business
Growth capital is more than just a rainy day fund. It gives your business the security and power to take small risks and the confidence to expand. Significant money in the bank is necessary, exceeding what’s required for monthly bills and upkeep, in order to survive past the start-up period. To become a thriving, viable business, you must branch past the requisite working capital and factor in funds for growth from Day 1.
The additional resources growth capital provides will create a safety net during fluctuations in profit. The unpredictability of national and local markets and economies will always be a reality, so finding early stage investors is key for long-term stability. During the cushier times when business is booming, invest those surplus profits back into your growth fund for future use. Consistent input into long-term funds combined with slow and wise withdrawals, will allow your investment to continue to steadily accrue interest and strength throughout the ups and downs.
How much growth capital is required for your business? It is important to strategize in terms of how much debt you are willing to accrue. A large, healthy fund translates to an expansive security net and limitless potential. However, keep in mind that a larger amount of money also represents a larger debt to the bank, your shareholders and/or your investors. Your company will require this fund in the long term to cultivate opportunities to increase your development and mature. However, always exercise discretion and caution when dipping into the account. Slow, steady growth will put you on a stable incline – this is only achieved by not depleting your funds to pursue a pie in the sky expansion. Keep your sights high while maintaining good business sense.
Growth capital can mean the difference between stagnating as a small business and being able to make the leap to a mid-sized company. You will need capital for expanded infrastructure and personnel in order to grow until your group has established enough of an upturn in profit to start paying back your debt. The upfront costs of an expansion can quickly drain your working capital. Whether you are just starting a new business from scratch or are seeking an expansion, growth capital will give you the security you need to maintain your budget while increasing profit.