Growing a Business: Self-Funding vs Business Finance

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So you’re trying to grow your business, but there’s one major obstacle: finance. Everything from advertising to manufacturing to simple everyday business operations cost money. Money is the fuel of business —  it feeds growth and funds new opportunities.

But often businesses don’t have the finance to achieve the growth they’re hoping for. So business owners have two options: invest their own money and self-fund the business’s growth, or apply for business finance.

Here are the advantages and disadvantages of both options so you can decide which is best for you: self-funding or business finance?

The Pros And Cons of Using Business Finance for Business Growth

Business Finance Gives You More Money to Play with

Business finance gives you access to money you probably couldn’t stump up yourself — especially if your business is still young. And with more money to play with, there are more opportunities for growth.

Larger amounts of finance allow you to save money by making the most of bulk orders or advertising packages. You’ll also be able to distribute the money to cover different aspects of growth. For example, half of your business finance could be allocated to boosting marketing efforts, and the other half could be used to improve business operations.

Get Almost Instant Access to Finance

Lots of business finance providers — especially non-bank lenders—have a speedy application and approval system. Some providers will make sure you have access to finance just days after you apply.

Speedy access to finance means you don’t have to put your business growth on hold. You can immediately start growing and increasing revenue.

There Are Different Types of Business Finance

There are several different types of business finance you could apply for. And there are more business finance solutions than there are ways to self-fund your business! This means you can find the best solution for you and your business — and receive the financial help you need.

If you want to finance orders, for example, rather than receiving a lump sum business loan, you could apply for purchase order financing. Finance like this isn’t technically a loan — it’s an advancement of funds. It gives you the freedom to cater to any customer and fulfil any job. 

You’ll Need to Pay Interest on Business Finance

While grants offer “free” business finance, most types of business finance will incur interest rates and charges. So borrowing money for business growth will cost you more than using your own money. However, the advantages of using finance — in particular, the chance to grow dramatically and quickly — outweigh the small interest fees.

Just make sure you shop around when looking for business finance providers, and avoid extortionate rates.

The Pros And Cons of Self-Funding Business Growth

Self-Funding Reduces Your Risk of Overspending

When using your own money to fund business growth, you definitely won’t have to worry about overspending. If you don’t have the money, you won’t spend the money. You’re also more likely to be conscious of what you’re spending because the money will mean more to you than business finance will. With business finance, it’s easy to fall into the trap of excessive spending simply because the funds are available.

Self-Funding Keeps Things Simple

Self-funding means the only person involved with your business’ finances is you. There’s no back and forth communication or payments to finance providers. Instead, the profit and expenditure are all on you.

You May Be More Limited with Self-Funding

When you self-fund business growth, you’re relying on what’s already in your bank account. So you may not have enough to achieve the kind of growth you were hoping for. Big plans often require big funds, but if you don’t have the cash, you may have to scale down a notch.

Using Your Own Money Can Put a Strain on Your Personal Finances

Ideally, you need some boundary between your personal and business finances. But self-funding means that boundary is likely to become blurred. This can put a strain on you and your family and increases the personal risk.

If your business experiences financial difficulty, you may find yourself under financial strain. You might then be tempted to take out personal finance in the form of credit cards or loans. Accruing personal debt could complicate things — and defeat the point about self-funding to keep things simple.

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