Business

Various Funding Stages Of Your Business And Their Significance

Imagine your business as an ongoing story and try to place it on an imaginary timeline.

At the far left end of the timeline would be the stage where your business was merely an idea that was taking shape. As you move along the timeline towards the right, your business slowly gets started and then establishes itself as a respectful organisation.

Along this timeline from inception to establishment of your business, there are several financing or funding stages that the business would have to go through. You can hardly run a business without making arrangements of decent finance.

Also, the money you need when you just start your business is never the same as the money you need when your organisation is at its peak.

The financial needs of your business will be different at different points in time. Here are some of the financing stages your business is bound to go through in its lifetime:

The Seed Stage

This is the first stage of financing, which every business has to go through. Here, like the seed of a plant, your business would need enough resources to imbibe and grow into a bigger version of itself.

This is arguably the most important stage of financing when it comes to setting up a business.  This is because here, you need the initial finance needed to start your venture. If you have a good enough credit score and a good financial backing, you can finance the venture by your own funds.

You may borrow the capital or add your own money, and get started with your venture using your own money.

The main emphasis is on the idea that leads to your business and all the processes that lead to the commencement of your business. However, you cannot ask for a venture capitalist to fund you at this stage as there is no reputation or history for your business.

The Launch Stage

This is the stage where your business is ready to launch after all the preliminary needs are taken care of. A business should seek a financer to whom it can show its initial income. This stage is crucial because it is here that you have a brief idea about where your venture is going.

At this stage, you can take a business loan or even simple cash flow finance from a provider to make sure that your day-to-day activities are easily taken care of.

The Establishment Stage

By the time you reach this stage, you have launched a successful product in the market and have been successful in manifesting the vision you always had in mind.

Now, you need to establish your organisation in a way that it starts becoming a household name when anyone talks about the concerned product class.

Here, an entrepreneur needs to gather funds to spend more on the promotional aspects. Hire the best ad agency and make the most creative campaigns. Interview as many people as you can and choose the most suitable ones that you’d like to work with. Once you have established your business in the best possible way, you can rest assured that it is well-equipped to grow in the future!

The ‘Line Of Credit’ Stage

This is the stage where commercial banks and card companies come into the picture. Here, the business organisation could ask for an additional allowance for their corporation as they might not have access to the capital they desire to spend.

The Expansion Phase

By this time, your business is already doing well in the market. Now, all you have to do is to take care of the physical as well as the emotional state of mind of your customer.

Also, no business enterprise can function in isolation and continue to be where it is. Therefore, after achieving immediate business targets, the enterprise needs to expand and have a wider reach than its competitors.

Here, your business has almost achieved everything but a loyal and a wider appeal. This is exactly the job of the ‘Expansion’ funding phase, where you need to gather funds either through bank borrowings or self-funding in order to expand your business venture.

Mezzanine

This is the final stage of your business funding before you go public. In this stage the company is valued over several hundred million pounds. Additionally, the company will also have several hundred employees and  be operating globally.

Initial Public Offering (IPO)

If the company has raised enough funding through the previous stages, going public is another option to expand your funds even further. All your investors who have traded their money for equity until this point will ideally earn their investment along with additional profit.

Some investors may retain their shares, but do not be surprised if many of them sell their stock at the beginning to reap the rewards of getting in early.

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