How Does an Established Company Raise Capital for Business Needs?

You might think that established companies with strong brand recognition could simply tap into profits to meet their business needs. However, there are many reasons your business—whether a start-up or established company—might need additional capital. Here are common scenarios that drive the need to raise money:

• Research and development for new products or services
• Managing cash flow during rapid business growth
• Expanding into new markets or regions
• Implementing innovative strategies for scaling operations

These situations often require more money than personal savings or business credit cards can provide. Whether you're running a small business or leading an established company, understanding how to raise business funds is essential for success. Let's explore the most effective ways to secure funding for your business needs.

If you're wondering how to raise funds for company initiatives, angel investors can provide an excellent funding source. These high-net-worth individuals offer capital to early-stage businesses, particularly those with a solid business plan and strong growth potential.¹ Business incubators can connect you with potential backers, including angel investors interested in your industry.²

An angel investor typically requests equity in exchange for their investment. The best investors often have interests aligned with your business model. Beyond funding, many angel investors offer mentorship to help ensure your business idea succeeds.³ When seeking access to angel funding, a fine-tuned pitch and detailed financial projections help demonstrate your potential for success.

Another powerful way to raise money is through venture capitalists. These investment firms specialize in high-potential opportunities, making them ideal partners when you need to raise funds for ambitious growth plans. Many companies in the growth stage find venture capital a desirable option for raising money to scale operations.⁴

Before approaching venture capitalists, ensure your business plans clearly demonstrate your unique value proposition. Understanding how to raise money for a company means effectively communicating your competitive advantages and growth potential to potential investors.

For small business owners seeking to raise funds, traditional banks and financial institutions offer reliable funding options.⁵ When raising money for business expansion, taking on debt through traditional loans or small business administration programs can help preserve your cash flow. While traditional banks may require extensive documentation, they often offer low interest rates compared to alternative funding sources.

To build business credit and secure funding from traditional banks, your business needs to meet specific criteria: at least two years of operation, strong annual revenue, and a good credit score.⁶ Interest rates and loan terms vary based on your business credit history and financial stability.

The Small Business Administration (SBA) provides additional ways to raise business funds through its loan programs. The SBA partners with various financial institutions to help small businesses access capital. Different loan types serve different purposes - for example, you can use a 7(a) loan to refinance current debt or upgrade your equipment.⁷ To qualify for an SBA loan, your business must meet the government's size requirements, which vary by industry.⁸

When investigating how to raise funds for company growth, government programs offer innovative strategies for securing capital. These programs provide financial assistance to small businesses through various channels, and unlike bank loans with high interest rates, you won't need to repay grant funding.

These programs can help you establish financial credibility while accessing capital needed for growth. Many early-stage businesses find government funding particularly valuable since it doesn't require personal savings or existing business credit.

Government programs incentivize veterans, minorities, and women to launch new businesses or expand established companies. You'll find opportunities supporting everything from international market expansion to technological innovation.⁹

The application process requires a solid business plan and attention to detail. While this highly competitive channel may not work for all business ideas, the potential for financial support makes it worth exploring for many small business owners.

For established companies needing to raise money quickly, invoice factoring provides a practical way to raise funds without traditional financing. This increasingly popular method involves selling your unpaid invoices to a third party at a discount in exchange for immediate capital.¹⁰

When your business needs money but wants to avoid equity dilution or additional debt financing, invoice factoring can help maintain cash flow. The factoring company provides the capital needed by paying you a percentage of the invoice value upfront.

Remember that while factoring companies aren't debt collectors, it's important to consider how their collection practices might affect your customer relationships and overall business model.

For small business owners seeking to secure funding without sacrificing full ownership, revenue-based financing presents an innovative strategy for growth. Also known as royalty-based financing, this method helps you raise funds for company growth by attracting investors who receive a percentage of your revenue until reaching a pre-determined amount.¹¹

While you'll need to offer investors more money than their initial capital, this way of raising money helps you maintain control of your business model and avoid equity dilution. Revenue-based financing works best when you fine-tune your business plans and demonstrate steady cash flow - it's not ideal for early stages or pre-sales phases. Though you might receive less capital than through venture capital, the aligned interests and flexible payment structure make it highly competitive with traditional financing options.

When exploring how to raise funds for business ventures, your personal relationships might offer viable opportunities to build business credit. Many successful small businesses start with financial support from friends and family who believe in your business ideas. These potential backers often provide better terms than financial institutions, especially when you're working to secure funding for a new company.

However, develop clear business plans and formal agreements before you borrow money through personal connections. While using your own money or funds from personal relationships can provide early-stage capital, mixing business and personal matters requires careful consideration. Before entering into this type of agreement, clearly communicate your expectations and make sure you trust your friend or family member. Otherwise, you could sour a life-long relationship.

For small business owners looking to raise money while building business credit, corporate partnerships offer innovative strategies for sustainable growth. This approach to raising funds for company development creates mutually beneficial relationships with other businesses —your partner company provides financial assistance while gaining brand exposure or market access.¹²

Corporate partnerships particularly benefit new businesses seeking both capital needed and increased market presence. These arrangements often extend beyond providing capital to help attract investors and secure funding through expanded networks. When approaching potential backers, focus on established companies that can offer incentives beyond basic financial support, helping you fine-tune your business model for long-term success.

Understanding how to raise money for a business is essential for small business owners seeking growth. The online MBA from the University of Kansas School of Business equips you with comprehensive knowledge to build and grow successful ventures.

The program's curriculum covers essential business strategies, from securing funding to managing operations and beyond. Through focused study in finance, marketing, management, and leadership, you'll develop the expertise to secure funding and make strategic business decisions.

As a student in the program, you'll join a vast network of successful alumni and gain access to resources that support your professional development. The online format allows you to continue building your business while earning your MBA from a respected institution.

Ready to enhance your business acumen? Learn more about KU School of Business admissions or contact an admissions outreach advisor today to discuss how the program aligns with your career goals.