The term growth capital refers to any money that a business borrows for the purpose of increasing profitability and the operations of the business. In can come in multiple forms with different rates and structures available. While growth capital typically includes long-term capital and working capital usually covers short-term business needs, this isn’t always the case.
Other Ways in Which Growth Capital and Working Capital Differ
While business owners take out a growth capital loan to help take their company to the next level, the purpose of a working capital loan is more to meet the day-to-day needs of the company. It’s meant for maintenance and not necessarily growth. Business owners can also choose from among different types of growth capital loans.
Business capital earmarked for growth taken on as a debt differs considerably from equity capital because the latter requires business owners to surrender some of the equity in their own company. In exchange, the business owner receives funding from an investor as well as a strategic business relationship with that person or organization. Both the investor and the company owner share the same goal of maximizing profits and pursuing business growth.
The opposite is true of debt growth capital. Since business owners do not surrender any equity in the company with this type of transaction, lenders tend to structure it as a cash advance or a small business loan.
How to Increase the Chances of Approval with a Growth Capital Loan
Lenders naturally prefer applicants to run a profitable company or a company that is just on the verge of turning profitable. They also want to see proof of a workable business model as well as an indication of how the business plans to spend the money. To apply for this type of loan or learn more about it, please schedule a consultation with Steadfast Funding Partners.