when it comes When it comes to funding, startups and established organizations will have very different experiences.
Traditional funding isn’t always available for high-growth startups, and even when it is, it often depends on the founder’s personal financial situation and their company’s existing revenue. While larger companies may turn to banks and other financial institutions, new founders often have to turn to other sources of funding to grow their business.
For my own business, I decided to look at alternative financing options to scale operations and expand our product roadmap. To accelerate growth, I decided to raise a small amount of equity alongside a large revolving credit facility.
Here’s how and why I use a credit facility to grow my business.
Raising a credit facility
To start, I approached a small lender who was able to provide a $3 million credit facility.
Banks often cannot offer a line of credit to a startup or small business, especially those without an operating history, given their legacy approach to underwriting.
It was therefore clear to us that we had to offer lines of credit to our customers. Our credit facility allows us to extend lines of credit to our customers, rapidly increase our product offerings, and embed this debt into our capital in ways that minimize the long-term cost of capital, which is clearly makes sense for our business. .
To expand our offerings, I turned to alternative financing: in October 2021, we closed a $77 million financing round, of which $75 million was a revolving credit facility and the rest was equity. Later this year, we will complete an all-stock acquisition to further enhance our technology and product roadmap..
how we did it
For our business model, raising a credit facility to fund all of our clients’ expenses made the most sense.