If you have exhausted the non-finance options for growing your business, there are alternatives to seed funding, start-up or development capital. In fact, some businesses never need this type of investment and get their finance from other sources in this sequence:
- Using their own funds – Usually the cheapest and easiest source of finance. Most businesses first commit their own funds as equity (capital) in their business, typically from personal savings and/or a mortgage of the family home.
- Funds within the business – You can get expansion capital by:
- building up working capital through business growth
- increasing your cash flow through better management of debtors and creditors or by better stock management
- taking on more debt
- selling debts owed to a factoring house that for a commission will advance you money against the debts, collect the debts and charge you for the service.
- Banks – The most common source of funding.
- Finance from friends and family – This source of finance is often in exchange for interest payments or a share in the business. Care should be taken when involving friends and family. They may be happy to share in your success, but will be less impressed if plans go sour.
- Grants, awards and subsidies – If your business qualifies, there are a number of funding sources you can access. For example, there are funds to help you:
- hire specialist advice
- assess technology or equipment to fill technology gaps
- address key technical or technological risks in your product or process development
- access training and advice to help build your business or technical skills
- develop international markets.
Generally you have a better chance of securing grants and funding assistance if your business is technology based, innovative and has significant export potential.
Help is also available for Maori and Pacific Island people. Whale watch in Kaikoura is a great example of a business that has tapped into Iwi resources. After being turned away by mainstream banks, local Ngati Kuri used their limited assets to secure a commercial loan. The business proved successful so after two years it bought a second vessel.
To expand further, local Ngati Kuri went to their tribal authority, the Ngai Tahu Maori Trust Board, with a proposition to borrow money. The board agreed and bought a major shareholding in the company. Whale Watch is now entirely funded by cash-flow.
Find out more about funding from the following providers:
Ministry of Science and Innovation
Economic Development Agencies of New Zealand (EDANZ)
Poutama Maori Business Trust
There are also grants and support programmes encouraging businesses to set up outside the major urban areas.
Find out more about regional business assistance
- Bootstrapping – Most successful entrepreneurs are good bootstrappers. They find funds and resources for their business in unusual, creative and innovative ways. Investors regard an ability to bootstrap as a good sign when considering who to invest in.
When you approach investors for funds they will be interested in your history of bootstrapping as it demonstrates your resourcefulness, resilience and commitment. They will also be interested in what you are doing to encourage innovation and creativity in your staff.
- Using advisors – Advisors can be an excellent source of potential investors. For example your contacts might include an:
- accountant
- lawyer
- marketing consultant
- investment banker or broker
- patent attorney or other expert on intellectual property protection
- IT expert to help you develop an e-business strategy
- business mentor
Additional advantages include their knowledge of your business and their ability to open up a less formal funding process. Your accountant is also well placed to give advice on your business case.
Also contact your Local Economic Development Agency, city or regional council, business networks such as the Chambers of Commerce and the Sustainable Business Network and relevant industry associations. By joining a cluster group of similar business types you can also share tips and ideas, get training and upskill, and learn how other businesses have overcome the challenges you face.
Find out more about accessing trade finance from the International Trade Centre's guide: How to Access Trade Finance: A guide for Exporting SMEs
