What Do Businesses Use Funding For?

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What Do Businesses Use Funding For?

Businesses use funding for many different purposes, including purchasing additional assets, restructuring debt and increasing working capital so that they can scale up their company.

Funding can be sourced in many different ways, including running crowdfunding campaigns and applying for government schemes.

How can businesses find funding?

Some company or startup founders use some of their own savings, capital or they may accept investments from friends and family to get going.

Once they have a proven model, it is not uncommon to use government grants, government funding or funding rounds to scale their business.

Funding rounds begin with the seed funding round and then can progress through series A-D if this is what the founders want.

During this time, companies may accept funding from angel investors, venture capitalists or crowdfunding campaigns.

What is funding used for in a startup?

Startup companies usually require some form of business funding to kickstart the business. The funding is usually used for product development and market research in the first instance, allowing the business to gain some direction.

At this stage, companies usually rely on the investment from the founders or friends and family. As they scale up, they will usually run funding rounds to continue the work they are doing and hire additional employees.

Very few company founders manage to set up a successful business without receiving some form of investment, since some businesses will need to borrow money to get off the ground. 

What is growth funding?

Growth funding is capital which helps a business to progress. This means that a business can make plans to scale up, offer new products and potentially enter a new market.

Growth funding can help a business take advantage of the chance to move forward and grow. Growth funding also sometimes allows a business to make an asset purchase which can help them to make their progression easier as they scale.

What is an asset purchase?

Asset purchase is when a business has the chance to buy equipment which can help the business to grow. This might include machinery or vehicles. 

There are often asset funding loans available for businesses looking to make an asset purchase to help their progression. 

Companies can use asset funding loans to make a purchase and the loan can be repaid on a monthly basis. Asset purchases do not have to be for machinery or vehicles, and can refer to a company taking on additional members of staff or arranging to rent an office space.

What is debt restructuring?

Debt restructuring occurs when a company changes the repayment plans on any loans or debt they may have taken out.

This means that a company is able to consolidate any capital in order to ease the business’ financial situation for a short time. This is common for startups.

The main benefit associated with debt restructuring is that a business will be able to improve its financial planning and make less payments monthly, so they feel less financial pressure.

The company may then have additional freed capital to progress more easily, and pay back loans at a later date.

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