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The Fundamentals of Funding & Financing

There are a variety of different ways to raise money for your business. Whether you're looking for equity, debt or some other form of investment, there is bound to be something that will work well with your company's needs. In this blog post, we'll cover the fundamentals of funding and financing - from what they are and how they work to the various types available.

Funding and Financing is the process of raising money for business purposes. There are two types: debt (loans) and equity (investments). Debt Funding

Debt funding takes the form of a loan, where you pay back an agreed-upon sum with interest on top over time. This type of investment can be used to finance companies that's looking to expand their operations. Key point is to meet client objectives at all times. Pairing with the right financial institution or Investor is already a big milestone.

Furthermore, building a pipeline is important to engage with investors. Make sure that they are qualified investors or finance institutions because you might find yourself in a sticky situation. Also know that with some debt financing, you might have to give some equity away to reduce your interest or this can be straight debt (loan). Equity finance can be pure equity and this can be a big portion of your business or start-up.

I highly recommend equity if you start-up rather go bootstrapping with your business for the first 12 months and take it from there. Businesses that have been in operation for more than 3-5 years can do with giving equity away. Most clients find it hard to give away equity for funding because they are emotionally attached to the brand or company.

When it comes to Funding and Financing, there are a few options that business owners can explore. The most common is seeking external investment in the form of equity or loans. However, depending on your business and its stage of development, you may also look into grant funding or BEE deals.

One important thing to keep in mind is to have a strong team to contribute to the success rate of securing your first round or second round to expand your business or start-up. Funding and Financing is a way to expand your business, but it's also an opportunity for smart entrepreneurs to grow their brand. I think 2021-2022 alot of entrepreneurs have started businesses in COVID-19 with the Post COVID they seeking more capital funding to expand.

The following are some key things to remember when seeking funding and financing:

- Do your research - it's important to know what type of funding or financing is best for your business

- Have a well put together presentation or pitch deck that outlines your business, its stage of development, and what you hope to achieve with the funding or financing

- Have a good marketing strategy in place to do cold calling and cold outreach to potential investors and lenders

- Be prepared for the next steps, such as due diligence where your financials will be reviewed. Funding or financing is not a guaranteed thing; it's always best to have multiple backup plans in place!

Funding: Funding refers to capital investments made by firms that are generally longer term than your traditional banking that provides funding. Funding can come in the form of debt or equity. Funding is critical to a startup as it allows you to grow your business, hire employees, and make key investments in technology and other areas that will help your business succeed.

Financing: Financing generally refers to loans from banks or other lending institutions. These loans are typically shorter term than funding with a higher interest rate. Financing can also come in the form of venture capital, which is funding from investors who are looking for a high potential return on their investment.

There are pros and cons to both Funding and Financing. Funding generally gives you more control over your company as it's coming from you or your shareholders. However, Funding can be difficult without having a clue where to start and who to trust. Funding can also take a lot of time and energy, which is valuable for any business owner who's trying to focus on the day-to-day operations of their company.

On the other hand, Financing can be easier in that it offers more traditional routes such as loans from banks or investors, but once again it comes with requirements that put entrepreneurs on the back foot. Financing can also be expensive and cause you to lose control of your company.

There are advantages and disadvantages for Funding as well as Financing, so it's important that entrepreneurs weigh the pros with cons before deciding which route is best suited for their business. Funding or financing requires an entrepreneur who knows what they're doing in order to maximize both paths to achieve the best results in the fundraising process. In conclusion I believe that Funding and Financing are both essential for a businesses success.

There are many different ways to raise money for your business, but the two most common routes are through Funding or Financing. Funding is when you get money from an outside source in order to finance your company's operations. This can be done through traditional sources such as loans from Banks and Loan Institutions with a high amount of documentation with no promise of any feedback. Funding is a good way to finance your business' growth, but you need to know the right people and have a great idea if you want funding from major companies – which can be difficult for many entrepreneurs who don't have enough experience or knowledge in Funding.

That's why at GrowthSmiths we have the expertise and experience to facilitate a strategy plan to be executed. 

This article was written by Sanville Moses, Service Line Leader for Funding & Financing at GrowthSmiths International. Find Sanville's solutions here: 

Funding & Financing – GrowthSmiths (thegrowthsmiths.com)