Financing your ICT business
Businesses need capital, especially when they’re starting up or growing rapidly. There are many ways to finance a business, from taking out a loan to attracting an equity partner. It’s important to find what’s right for you.
To decide the best way to finance your business, you should consider:
- why you need additional capital?
- what stage of growth is your business in?
- what is the financial condition of your business?
- how much capital do you require?
- what constraints would the finance provider put on your day-to-day operations?
- what impact would the finance provider have on the ownership of your business?
These questions will help you determine whether you should look at internal finance or external finance. Contact an IIB business advisor for help deciding which is best for you.
For some businesses, a traditional loan might be the best form of finance. For others, attracting an equity investor might be best.
Loans require the ability to meet regular repayments. Equity, on the other hand, is more patient and doesn’t necessarily require regular servicing.
Equity partners seek a return on investment based on medium to long-term capital growth, which may outstrip debt-funding returns in the long run.
You can improve your chance of attracting an equity investor by demonstrating your business has:
- a superior product
- high growth potential
- global prospects
- a sustainable competitive advantage
- a good management team
- previous investors
- existing customers and partners
- realistic and alternative exit strategies and
- professional business practices
Accessing “smart” finance?
“Dumb” finance is usually just a transaction to acquire funding.
“Smart” finance combines financial support with extras such as management experience, contacts, mentoring, specialist advice and enthusiasm.
Smart finance is much more valuable than dumb funds. It is important to know what you have, what you need and what extras you can get from your finance provider.
Getting help from the IIB
The IIB recognises that access to capital is vital for many ICT businesses’ growth. An IIB business advisor can work with you one-on-one to get your business finance-ready and link you to appropriate finance sources.
The IIB’s services include:
- advisory services and education programs designed to help get ICT businesses investment-ready
- introductions to business angels, venture capitalists and multinationals looking for strategic investments
- identifying mentors and consultants to ensure businesses can successfully raise capital
Contact the IIB for more information.
* Some of the above information on Financing your business was sourced from the Queensland Department of Tourism, Regional Development and Tourism.