Every entrepreneur and founder of a start-up wants to grow. However, every business owner must weigh the financial benefits against the capital required to finance that growth. Companies are finding innovative ways to use emerging technologies at every stage of their journey, from data collection to financing, thanks to technological advancements. Traditional venture funds can dilute business equity and bank loans are too costly for business owners.

Let’s take a look at the modern financing options that can be used to help founders and business owners raise capital.

Non-dilutive Financing : This alternative financing option offers founders instant cash to help them scale up their businesses while maintaining their growth requirements and working capital. Non-dilutive financing has one notable advantage: the founder doesn’t have to sell the company equity in order to grow the business and can still enjoy full ownership.

Recurring revenue financing: This innovative funding option has the potential to revolutionize early-stage to growth-stage fundraising and become an asset class for SaaS companies, IT/Tech (PropTech. EdTech. HealthTech.) as well as D2C subscription businesses. Recurring revenue financing allows founders to be flexible and help businesses grow. Recurring revenue financing allows business owners to convert existing recurring revenues streams into non-dilutive capital. In one go, companies can raise as much as 90% of their Annual Recurring revenue (ARR). The investor can be paid back by the company as soon as they receive it from customers. This allows companies to easily raise growth capital.

Bank Debt: This financing option allows the business owner to obtain a bank loan through the sale of fixed income products such as bonds, notes, and bills. The borrower has the option to pay off the loan either monthly, semi-annually, or at the end of the loan term. This financing option is subject to limitations. Banks may require collateral, guarantees or a more than three-year history.

Revenue-based Financing : Companies can use this method to raise capital based on their ongoing revenues. The investor will make payments based on a percentage of the revenue. This is the most suitable solution for D2C players and e-commerce industry professionals as they are required to drive company growth via digital marketing investments.

The bottom line

A forward-looking approach is essential to allow new businesses to flourish in a changing environment. These alternative, non-dilutive financing options are a great way for businesses to raise funds. These new financing options allow one to retain full business control without having to worry about reducing the equity or stake of the company. These innovative financing options are becoming more popular, which will ultimately lead to industry growth.

By Manali