How to Get Funding Fast for Australian Businesses
Updated: Mar 1
Five Effective Capital-Raising Strategies to Fund your Business Fast
Small businesses form the backbone of the Australian economy as their collective success fuels further growth and expansion. There are over 2.5 million actively-trading businesses that account for roughly over a third of the country’s gross domestic product. However, as with any Australian business big and small, the amount of capital is a major factor that will determine success or failure. Many small businesses tend to have difficulty securing favorable loan terms, low-interest rates, and proper capital financing while some are unable to get business loans from traditional banks at all due to stringent approval processes and other intervening factors.
As a business owner, you’re probably aware of these facts by now so getting proper business funding from the very start is more important than anything else. Bear in mind, there are no shortcuts, magic tricks, or secret strategies from financial gurus or self-made millionaires that would instantly raise your capital fast. If you know your specific business needs and requirements then you will probably have an idea of how you can bankroll your venture and determine better outcomes moving forward.
1. Make that Perfect Business Plan
It may sound cheesy but you may have heard this quote from Benjamin Franklin: “By failing to prepare, you are preparing to fail.” What we’re trying to get out of this is that business owners should think about every single step in achieving their goals. That means knowing every single step on how to raise capital that will fund the initial operational expenses thereby jump-starting your business to produce the profits that will fuel that growth towards success. Whatever decision you make will have corresponding effects and consequences on the long-term viability of your business.
By failing to prepare, you are preparing to fail. - Benjamin Franklin
Business plans are not just a glorified to-do list, treat them like a vital tool that will help you secure funding. When you take out startup business loans, banks and other financial institutions often look for business plans so they can gauge your financial risk. That way, they can determine if you deserve to get a loan from them or not. Even if you get one, they will determine how much money you can borrow and how much interest they’re going to charge you.
So how to make one?
Make a clear description of your business. What is your business about? What does it do?
Provide a market analysis of your competitors and target market.
Outline your company's organisational structure by showing the defined roles and responsibilities of employees, managers, and decision makers.
Figure out the financials by showing how you intend to make money from your business.
2. Do that Financial Due Diligence Ideally, you want as much capital funding as fast as possible for your startup venture or business expansion. However, that doesn't work that way in real life.
Part of your business plan is making financial due diligence. That means you need to take time to actually know your business finances, cash flow, tax liabilities, and other figures inside and out. After all, every prospective lender and investor would want to know your business's financial health before they can commit their money. Before you get your business off the ground and running, start building your budget and determine all the costs involved, like company incorporation, office space rental, and hiring employees.
Another thing to keep in mind, your financial planning doesn't stop at calculating the expenses as you also have to make projections on customer acquisition, retention rate, and customer lifetime value. Once you figure out all the costs and projections, you will determine how much money you need to raise to fund your business.
3. Know Your Capital Funding Options
Is your business plan ready? Are all the costs and projects calculated? If so, you may have to start figuring out various fundraising and line of credit sources.
a. Family and Friends
If your personal savings are not enough, one of the first things you ask for money to fund your startup is your family and friends. Unlike banks and other financial institutions, they are the ones who know you very well and understand your passion for turning your ideas into reality. However, you're also putting personal relationships on the line so keep that in mind.
b. Banks and Other Lenders
Another popular source of business funding is through banks and other lenders. Although most banks and financial institutions are traditionally careful about lending money to small companies and startups, there are those that offer special loans.
For a quick funding boost, unsecured business loans give you access to a fast cash loan contract without needing financials as the application and approval process are done within 24 hours. However, you have to be well aware of the terms attached to the funding before you sign on the dotted line.
There are alternative lenders and other non-bank financial institutions that offer similar services as well as easy loans to prospective business owners. But there is a downside to this, many of these companies are predatory with their extortionate interest rates and shady business practices.
c. Venture Capitalists
If you want an alternative to loans, there are venture capitalists that are willing to invest money in small businesses and startups using funds pooled from investment companies, large corporations, and pension funds. As they don't use their own money, they tend to invest in established and promising startups based on a risk-return ratio which means your food truck business or flower shop is out of the running.
Though they can help secure bigger funding for your business, venture capitalists ask for a significant return on investment -- from 25% to 35%. That means you may have to be open to giving up some equity in order to get larger funding.
d. Angel Investors
Although most people mistake angel investors for venture capitalists, they are actually different from the latter. What they do is use their own money to provide seed capital to launch a business with high growth potential so that they can get a good return on their investment. Their motivations are not only about getting huge profits and better returns on investment but making sure they build successful businesses.
The huge drawback is that they all want greater equity and control over how your business operates. They are more likely to provide expert advice and management support than completely funding your entire operations.
There are over 561 federal- and state-level grants and programs that help relieve the financial burden of small businesses and startups in Australia. However, these grants tend to award funding to businesses that operate in a very specific industry or location so you probably have to find one that suits your needs and business structure. Oftentimes, these are set up for economic development purposes to attract new businesses in certain underserved areas and industry segments.
It is also important to understand that the application process can be very paperwork-heavy so it will take a while before you can fully secure that much-needed funding. Such delays can cause significant cash flow and operational issues that would seriously affect the business viability. If you can wait for too long, then go for it.
A new way of raising capital is through crowdfunding platforms like AngelList, Fundable, IndieGogo, and Kickstarter. It's one of the fastest ways of generating funds as business owners can outsource it to as many people as possible. However, there are also downsides.
A target amount has to be established when utilising crowdfunding for business financing. If you don't reach the target funding then all the money pledged should be returned to the investors. That means, you won't be able to get the funds.
Another thing to keep in mind is that there are other businesses like you competing for the same crowdfunding support so you have to stand out from the rest of the crowd. Most crowdfunding investors tend to invest smaller amounts as compared to one large investment from a traditional startup investor. You will also have to deal with a lot of smaller investors, each with their own needs and demands.
If you are unsure about taking business loans or giving up equity, you can always use your own savings to get your business up and running. Apart from personal savings, you can utilise credit cards, mortgages, and lines of credit on your home. It can be a huge financial risk on your part as you will end up in substantial debt when your venture fails.
4. Team Up with a Business Partner
As they say, "Two heads are better than one." Getting someone on board as a business partner will help accelerate your business development. You can divide the task of growing the business by funding it by the two of you or working together to secure funding. As long as you work together, you are reducing the liabilities while sharing the profits. It's all about having mutual trust to achieve common success.
5. Minimise Startup Business Costs
Before you fall into a big financial hole, you have to start reevaluating your startup costs as you may not have to raise as much money as you initially thought. Maximise the business funding you received from investors and other sources by saving as much money as you can.
Many business owners and startup founders tend to prioritise on building a great business before dealing with the administration over time. Expect to miss out on key funding opportunities if you haven't organised everything from the start. Should you decide to work with investors, you have to conduct due diligence by hiring good financial professionals to crunch through your numbers and ensure tax compliance. Make a good pitch to prospective venture capitalists so you can secure their investment.
At the end of the day, it's all about careful preparation and strategic planning to take full control of your capital raising initiatives. It's your business and you're the one driving it forward.
Want to get your business funded fast? Funding Link is committed to providing small to large businesses with flexible and fast funding solutions. Find out what your options are. Apply here now!