Debt Free Ways to Fund Your Business Growth

Running a small business, and keeping it growing, requires grit, determination, know-how…and money. When your business starts to take off, it can be an exciting time, but also a stressful one, because, well, growth isn’t cheap – in fact, it can consume resources at a frightening pace! On top of needing to fund your operating expenses, you might also need money for expansion, hiring, or replacing your capital assets, and increasing your revenue enough for all of that can be challenging. So what should you do? Apply for a loan? Use up existing business reserves? Max out your credit cards? If these options sound less than ideal, it’s time to consider other ways to create and/or free up cash, so you can fund your growth and keep your business moving forward, without being saddled with tons of extra debt.

Feeling Disinclined to Debt?

arrow going upwards with money and numbers in the background
Fees or interest rates for a loan might be too high, which is why business owners opt not to get one.

According to a 2020 Small Business Credit Survey released by a collective of Federal Reserve Banks, 66% of businesses had financial difficulties in 2019, but 57% did not apply for or accept financing or third-party funding. Why? Well, there are multiple reasons, and you might relate to some or all of them:

  • The fees or interest rate for a loan was too high
  • The repayment terms for a loan were unfavorable
  • The amount offered was too little
  • There were collateral requirements that were too difficult to meet
  • The business owner simply did not want to accrue more debt

Debt isn’t always a bad thing, but if you recognize in the above your own reasons for shying away from debt-creating ways to fund your growth, consider trying these strategies for funding your growth goals first:

Bring More Cash In

Sure, it can be easier said than done to simply increase sales to keep your business funded, but there are some clever ways you can bring in more cash from your customers:

  • Raise your prices – Hear us out: we’re not saying you should all of a sudden have a steep increase in prices, because that probably would put customers off. But don’t automatically dismiss the idea, just remember that how you raise your prices matters: for example, most customers won’t really notice an increase of less than 10%. For increases greater than that, consider communicating with your customers or having some sort of enrollment strategy, so you get them emotionally on-board. Another option for strategically raising prices? Offer a volume discount on larger orders.
  • Reward loyal customers – Any strategy that promotes regular repeat purchases is a great idea, because there are no additional customer acquisition costs. Try a loyalty program: it won’t cost you much, but it can really increase customer satisfaction and retention! In fact, according to a 2014 study by tech services firm Technology Advice, 82% of people said they were more likely to shop at a store that offered a loyalty program. 
  • Upsell and cross-sell – Whenever you can, try to “supersize” your customer to a larger or better service, or cross-sell them some sort of package deal. They’ll get increased value, but your costs for providing the products or services won’t increase exponentially. 
  • Have your customers do some of the work – By using clever marketing strategies such as viral loops, you can get your customers to bring in more business for you by rewarding them for referrals. hand with a magnet coming out of a laptop screen attracting money
  • Collect your money – If you’ve got a load of unpaid invoices, now is the time to revisit them. You do have the option of selling your unpaid invoices to a collection firm, but you won’t get the full amount owed to you, so you might want to first try strategies for motivating your customers to pay. Think of ways you can encourage early payment (like small discounts or a bonus) so they’ll want to pay, and you won’t be left hunting them down to pay, and will have more cash to put back into your business.
  • Look at your payment terms – If you’ve been offering very generous long-term payment plans, consider cutting them down for new clients. For example, if you’ve been offering 90 days to pay, offer new customers a 30-day repayment plan. Even better, require a substantial deposit or upfront payment, which is standard in most industries, and certainly not unreasonable.

Examine Where Your Cash Is Going

To prefund your growth, you’ll need to be bringing more cash in, but you’ll also need to be very mindful of how your cash is going out. Find ways to keep more cash in your business by:

  • Reviewing subscriptions and memberships – Did you sign up for any free trials or subscriptions once upon a time? A 2017 survey found that 48% of participants signed up for free trials that were automatically renewed without their knowledge. Or maybe you’ve got some memberships that you aren’t actively using – if you’re trying to free up cash, get rid of them for now (you can always sign up again at a later date, and maybe you’ll even get another free trial period!).
  • Renegotiating monthly expenses – Rent, utilities, technology – they’re all major expenses, but sometimes they’re not set in stone. Try renegotiating with your landlord, or playing utility or internet/phone companies off of each other to see if you can get better rates. person's hand with a pen in in pointing at marketing graph
  • Tracking your marketing – Are your marketing dollars being spent in the best way possible? You can’t know for sure unless you’re actually tracking the effectiveness of your strategy, so make sure you stay on top of it.
  • Looking for cash leaks – Your money might be trickling out in a lot of little slow leaks, so try and plug them wherever you can. Audit your recurring expenses at least once a year, paying special attention to costs that have gradually increased over time, like internet services.

Cut Costs

There are also some more active ways you can keep your money doing what it should be doing – funding your growth:

  • Downsize – Consider relocating to a smaller space with lower rent/utility costs, or even using a co-working space that doesn’t require a long-term lease.
  • Sublet/subcontract – If you’ve got physical assets that aren’t in constant use, consider making a little extra cash by subletting them. Or, if you’ve got extra manpower or time, you could do some subcontracting for another business in the short term to get some cash flowing.
  • Lease – It might be tempting to buy, but it can be more cost-effective to lease, since buying means tying up your cash in a long-term investment.
  • Split costs – Look into sharing resources, such as employees or internet services, with other similar businesses.

Look at Alternative Funding

If you don’t want to go the loan route, there might be some other ways to bring in outside funding. For example: 

  • Corporate grants – Sometimes large corporations will offer grants for small businesses, especially for those run by members of marginalized groups, so look at your supply chain and see which corporations have philanthropic components, or speak to your local Small Business Development Center (SBDC). 

    group of people with a money bills over them and another person by themselves with a lightbulb over their head

  • Crowdfunding – Did you know that, according to GoFundMe, there are 21 different crowdfunding sites? Check them all out, because one might be better than another for your business, depending on your goals and needs. 

Keeping your small business growing sometimes means taking on debt, but it doesn’t have to mean drowning in it. You can find ways to bring in more revenue and keep more of your cash so that you don’t have to take out massive loans or max out your credit cards – just try the above strategies and you’ll be on your way to some no-debt growth! 

About The Author:
Cassandra Love

With over a decade of helpful content experience Cassandra has dedicated her career to making sure people have access to relevant, easy to understand, and valuable information. After realizing a huge knowledge gap Cassandra spent years researching and working with health insurance companies to create accessible guides and articles to walk anyone through every aspect of the insurance process.

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