As a small business or startup, you need to make smart and responsible decisions when it comes to your finances. Many owners and members of leadership are hesitant when considering to use non-dilutive funding for their business.
Businesses that are in the growth stage have the challenge of cash flow management. Money is moving quickly, so it can be difficult to make sure you have enough of a financial foundation in place. Many owners and founders decide to go with venture capital (VC) to help out in these situations. When you have cash on-hand, you feel better taking on calculated risks and pursuing possible growth opportunities.
While VC is an option, startups have to keep in mind that it is important to build your credit history. This can be done through non-dilutive funding sources.
What is non-dilutive funding?
When working with venture capitalists, most business owners have to give up equity in their company to get the funding they are looking for. For non-dilutive funding, this is when a business owner receives capital that doesn’t require them to give up equity or ownership.
Non-dilutive capital can come from contributions from donors, vouchers, grants, tax credit programs or even family. Non-dilutive funding is often considered a great option when establishing a company, but many businesses rely on it at different stages of growth.
When should you use non-dilutive capital?
In the end, this decision is fully up to the discretion of your company’s leadership. Every business is different and unique, so there are many variables to consider when trying to establish your financial standing.
For companies that choose to use non-dilutive capital, some of the reasons they use it sooner rather than later are:
- Quick access to available capital
- Companies are able to take more flexible draws with no caps or restrictions on how that capital is used
- The amount of funding available grows as your ARR grows
After working hard for years, founders want to receive the outcome and compensation that matches that level of contribution. To do this, they must protect their equity. By using non-dilutive funding now versus six months from now could be the answer to growing your ARR even quicker.
How you can use non-dilutive capital
When it comes to non-dilutive capital, it depends on what your financing partner allows you to do with the funds. At revtap, prior to engaging we ask for a brief description of what the funds will be used for. We’re here to help you grow your business, and only you know what the best way to do that is!
Here are some common ways companies use financing to help grow their business:
- Invest in marketing
- Speed up product development
- Hire more people
- Help reduce the cost of growth
- Buying critical software
- Gain access to cash
If you are interested in non-dilutive capital and using revenue-based financing to help grow your business, then reach out to the revtap team. We are here to help you bring flexible, non-dilutive capital to your business!