If traditional debt financing is proving challenging for your early-stage business, there are other capital-raising methods to consider. Your Truist relationship manager can talk you through the pros and cons of each funding type.
Equity financing
With equity financing, you sell a share of your business to infuse capital into it. You can do that through a single investor—often called an angel investor—who buys a stake in your company or through a venture capital group that invests in businesses they believe have high growth potential. Rhodes says the key with equity financing is ensuring the opportunity is worth the cost.
“When the value that you’ll create through the opportunity outweighs the cost of selling off a piece of your business,” says Rhodes, “that’s when to consider equity. You won’t have debt to pay back, but you’ll share profits, ownership, and some control over strategic planning.”
Much of the value of equity funding, he says, could come from the professionalism and experience that an institutional or angel investor could bring to your company. Or it could be the backing that an equity investor could provide to help operationalize and grow your company.
“Partnering with an equity investor could open you up to new customers or markets that you might not have been able to reach on your own,” says Rhodes.
Small Business Administration (SBA) loans
If you meet the eligibility requirements, SBA loans can be an invaluable source of funding in the early stage. They offer a wide range of credit options, competitive fees and rates, extended repayment terms, and smaller down payments than traditional commercial loans.
“Because the SBA provides a guarantee or a portion of the capital, that allows the bank to lean into higher loan values,” says Rhodes. “Lower down payments mean companies can keep more cash on the balance sheet for working capital.”
Even if you believe your business is too large for an SBA loan, it’s an option worth exploring with your relationship manager. The size standards for SBA qualification revolve around either revenue or employee count, depending on your industry.
> Read how Truist client Willow Designs leveraged the benefits of an SBA loan to triple its workspace and increase revenue.
Equipment financing
Equipment can be a major expense in the early stage, whether you need vehicles, machines, or computer hardware. Equipment financing options include leasing or buying—and each has advantages. For example, owning your equipment means you can count the machines as assets that can increase your enterprise value. However, leasing reduces upfront cash requirements, preserves working capital, and makes upgrading equipment easier in the long run.
“It’s important to find a balance between meeting short-term objectives while keeping long-term goals in sight,” says Rhodes. “For example, consider a lease if you only have short-term needs for the equipment and it won’t be used again. Buying may make more sense if you have long-term needs where the equipment will be used again and again.”