How should I finance growth?
I want to grow, but where will the money come from? Growth almost always costs money first and earns it later. The gap in between is where businesses struggle most. 🏦
Growing on the wrong funding can push even a successful business into a cash squeeze.
Short answer: first the business’s own cash, then customers’ money, and external funding last. External funding is for accelerating growth that is already proven. 💰
This guide is general information; take advice from an accountant and a finance professional before financial decisions.
Four sources, in order
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- The business’s own cash
- Customers’ money
- Grants and support
- Loans and partners
Cheapest first. 🪜
The business’s own cash
A share set aside from profit; the cheapest and most independent source. 🌱
Customers’ money
Deposits, pre-orders, subscriptions; customers fund growth in advance. See the subscription guide. 💳
Grants and support
Public support programmes provide funding under conditions; applications and terms are read carefully. 🏛️
Loans and partners
Debt or equity; the fastest but most binding source. ⚖️
Fix the cash cycle first
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- Collect faster
- Ask for deposits
- Reduce stock
- Balance payment terms
Four levers, before external funding. 🔄
Collect faster
If the time between sale and payment shrinks, cash frees up by itself. ⏱️
Ask for deposits
On long jobs, an upfront payment makes the work self-funding. 💵
Reduce stock
Stock sitting on shelves is tied-up money. 📦
Balance payment terms
The gap between paying suppliers and collecting from customers is closed. 📅
When external funding makes sense
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- Growth is proven
- The repayment source is clear
- There is a buffer
- Terms are understood
Four conditions. ✅
Growth is proven
If a new channel or product made a profit on a small scale, borrowing to scale it makes sense. 📈
The repayment source is clear
From which income, and when, will it be repaid? Written in numbers. 🧮
There is a buffer
If the plan slips, repayments should not falter. 🛡️
Terms are understood
Interest, collateral, early repayment, partner rights; read with an expert before signing. 📄
Four common mistakes
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- Borrowing for an untested idea
- Short-term money for long-term investment
- Mixing personal and business money
- Taking partnership lightly
All four put the business at risk. 🚧
Borrowing for an untested idea
Funding unproven growth with debt doubles the risk. 🎲
Short-term money for long-term investment
Money due in months for an investment lasting years creates a cash crisis. ⏳
Mixing personal and business money
Which money goes where becomes unknown. 🔀
Taking partnership lightly
Giving equity means sharing decisions too; it is hard to take back. 🤝
A funding plan
One page, four lines. 📋
What should I do today?
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- Step 1: measure the cash cycle
- Step 2: pull one lever
- Step 3: write the funding page
- If you want help
Three steps, one day. 🪜
Step 1: measure the cash cycle
How many days from sale to payment? A number. ⏱️
Step 2: pull one lever
Deposits, faster collection or less stock; one this month. 💵
Step 3: write the funding page
How much, when, from where, what if not; then talk to your accountant. 📋
If you want help
Let us build your growth plan: use the consult your expert form. For your current setup see the digital audit; the bigger picture sits in the three-year growth roadmap. 🎯
Related reading from the archive: annual digital budget · what remains after consulting.
📝 Notes From the Field
A business researching loans to grow had its cash cycle reviewed: collecting from customers took about two months on average. Deposits and stage payments were required on long jobs and invoicing sped up. The freed cash covered the first growth step without a loan; a loan was only used later, to scale once the step was proven.
📖 Short Glossary
Cash cycle: the time for spent money to return through sales. Deposit: payment taken before work starts. Collateral: security offered against a debt. Equity: an ownership share in the business.
⚡ Quick Summary
Growth costs money first and earns later. 🏦 Sources in order are own cash, customer money, support programmes, then loans or partners. Fix collection, deposits, stock and terms before external funding. External funding makes sense with proven growth, clear repayment and a buffer. Take expert advice before deciding.
🎯 Next Step
Let us build your growth plan: use the consult your expert form. Growth risks sit in the growing too fast guide; for your setup see the digital audit.
Frequently Asked Questions
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The total cost of the growth step and the gap until it turns a profit. 💰
Spread across months; staged, not all at once. 📅
A mix of sources; no single dependency. 🔀
The stopping point and way back are written in advance; risk in the growing too fast guide. 🚪
Follow the official pages and announcements of the relevant institutions regularly. Each programme has different conditions and obligations; read them carefully before applying.
A loan is repaid but you keep control; a partner does not need repaying but shares profit and decisions. Choose with an expert based on the business’s position and your risk preference.
For most small and mid-sized businesses, yes, though more slowly. Once the cash cycle is fixed, much growth can be funded from the business’s own resources.
Source: KOSGEB — support programmes