Alternative ways to fund your business
Missed out on a grant? Here’s how to find alternative funds using information from your grant application.
Grants are a great way to boost your business funds for a particular area of your business, whether it’s research and development, innovation or marketing. Funding bodies tend to be not-for-profit agencies, most commonly local, state or federal governments, but also research institutions such as universities, and foundations where your business’ products or services meet their agenda.
While attaining a grant is not necessarily a hard task, far more businesses apply for grants than there are funds available, so receiving money from a grant is not guaranteed. In many cases you may also have to meet strict criteria that could affect the way you do business, or the funding body may have a different agenda to your business’ aims.
The grant application process can be quite intensive and involve identifying and sharing a lot of company information. If you’re finding it difficult to throw away all the effort you put into the application, here are some ways to leverage the information you now already have at hand, and maybe obtain the money some other way.
A win-win situation
It may sound implausible to win a prize when your grant application has just been rejected, but if you already have all the information readily available, it’s worth a shot. Often competitions are looking for entries that are a little bit different, whereas the grant process may seem a bit more conformist.
Prize money can go up to several thousand dollars, such as the recent $30,000 that RMIT University awarded as part of its 2009 Business Plan Competition earlier this year, or valuable equivalents; last year, for example, the Australian Small Scale Offerings Board held a pitch competition where the winning business received a $40,000 listing.
Non-monetary prizes could include business services or office equipment that could assist you. The Telstra Business Awards, for example, have a $400,000 prize pool that is made up of a mixture of cash and Telstra products and services.
While you’re at it, don’t forget that there are a number of awards that may not have monetary prizes, such as the Australian Export Awards, but are nonetheless valuable from a marketing perspective and could enhance your chances of receiving grant money or other prizes in the future. If you already have the information at hand, why not?
Working capital harder
If you’re looking for extra money because you need more working capital—as opposed to being a start-up entity at the commercialisation stage—investigate other ways where you can free up funds. Securing a steady stream of cash flow is vital for most exporters, though you wouldn’t be alone if you found this difficult to do. Use the information you gathered for the grant application process to make cash flow projections based on your current sales and identify areas where you’ll be investing the money, then see whether you may be able to cover this area by extending your current working capital.
Invoice finance is one way to ensure your sales equate to money flowing through the business. Invoice finance, which includes factoring and invoice discounting, allows you to take your sales receipts to a financial institution that will, for a fee, give you a percentage of the proceeds upfront, usually between 80–90 percent, and the rest upon settlement of the invoice. This means you can use the money before it actually falls due from your buyer, which could be some 90 days after the sale.
Factoring is invoice finance where the financial institution also manages your sales ledger, which means they will chase late payment on your behalf if necessary. It will typically be more expensive than invoice discounting, which is invoice finance without this type of management.
Another thing you can do is extend your existing credit lines with your financier. If you’ve been a good client, most institutions would be happy to accept the business case you initially built for your grant application as a basis for requiring more capital.
Reached the limit of your credit? You may be able to secure more money via a guarantee such as through the Export Finance and Insurance Corporation (EFIC). EFIC’s Headway program has been designed specifically for small to medium businesses that seek an extension to their current finance facilities but do not have additional security to offer.