15 Non-Scary Ways to Boost Your Company's Growth with Financing

The word "Finance" itself comes from the French word Finer, meaning, "to settle a debt," or, "to finish/make an end." The concept of finance is therefore rooted in the study and practice of settling debts for the benefit of both parties involved.

As I've previously written in this article here , debt is a double-edged sword that cuts both ways. It greatly improves the gains you earn on a good asset that you didn't pay for all by yourself, and it also exacerbates the issue of overconsumption in the case of credit cards, vehicles, and poorly performing assets.

But once you have come to grips with how debt can be constructively used, you need to identify an asset to acquire or expand with it. This article can't just go and show you a great asset to buy, that is on you. But once you have found something worth financing, or desire to grow your business faster than waiting for organic progress, the information contained here will hopefully prove very valuable to you. To start, I've defined some basic financing terms you may see in the bullet points below. Read those first, then take that knowledge to understand the 15 not so scary ways of boosting your growth with financing.

• Interest Rate (APR): The Consumer Credit Protection Act (Truth in Lending Act) created the concept and mandate of APR: Annual Percentage Rate. This makes loan applications easier to understand when you can clearly see the interest rate cost of a loan to you. Having a clear metric to compare apples to apples is a god thing. Things were much more opaque before the passage of this act and borrowers often were unclear on the interest rate.
• Collateral: Any type of asset you are willing to put up against the loan. If you default, the terms of the loan state that the lender can take your asset and sell it as quickly as possible to cover their loss you just cost them. Be careful what you bet... That being said, collateralizing a loan makes it much safer to the lender as they have a built-in contingency plan. Therefore, they are likely to offer you a more attractive interest rate because the risk profile is lower.
• Personal Guarantee: Many business loans, especially in the early days where profit is unproven, require you to backup your business with your personal assets. Banks will not lend to a brand new LLC with no income, as it could simply declare bankruptcy and their loan vanishes. Instead, they will lend to such an LLC if there is an owner standing behind it able and willing to pay no matter what.
• Credit-Worthiness: Not just your credit score, think of it as an investment rating. Bonds and governments are given ratings by S&P Global and Moody's rating agencies that simply indicate how good of an investment they are, based on their ability to repay debt, contrasted with how much interest they are willing to pay. A high credit score means you are a good and safe investment to lenders.

1. Equipment Financing This one is pretty straight forward, and a simple place to start. If the business you are trying to start revolves primarily around having and using a piece of equipment, then that is likely to be your biggest expense in the early days. In practice, I've seen a helicopter instructor who bought a helicopter to get started, plenty of owner/operator truckers, and a couple of Uber drivers who dabbled in Amish transportation and light duty towing. Beyond my experience directly helping these come to fruition, I've seen semi-nomadic harvesting teams buy enormous combine harvesters and work their way across the country, harvesting fields as they go, and I've had friends buy small planes to teach others how to fly. Fishing boat captains and boat tours are other great examples of this concept: buy a thing not any old Joe can drive or fly, and monetize it somehow. Boom: you've now got a business. In some of these instances, besides the cost of whatever specialized licensure you may need (which you likely already have, because you wouldn't do this if you had never done it) you can file your LLC, register your EIN, buy insurance, and set everything up for less than a couple grand per year. The major expense is the equipment you need to do the work. The beauty of this is that the manufacturer of that equipment usually offers financing at fairly attractive rates. To go back to our discussion of financing basics, the manufacturer is incentivized to lend to you, because they want to make a sale. But even better, the debt they hold will be collateralized against the equipment itself. Obviously though, the lifespan and liquidity of the equipment has a big impact on the rate you pay. Used cars have worse lifespans than new cars, and thus the seller's backup plan to repossess and resell in the case of a default is worse than with a new car. Helicopters hold their value a little better than cars though, as do big semi trucks. To qualify for this, you're likely going to need to prove that you have made income doing this in the past, likely as an employee. If you've never driven a big rig, the bank may be hesitant to loan you the money to stake your livelihood on figuring it out, and for good reason. If you want to go this way, learn your trade, save up for a down payment, then make the purchase and get to work.
2. SBA MicroloansThe Small Business Administration is the only cabinet-level federal agency dedicated to seeing small businesses grow. We all know the IRS and the EPA are not in the business of helping small business. They offer loans in various sizes to small business founders for all kinds of reasons: business growth, marketing, equipment purchase, even working capital, just not real estate. They have a microloan program which aims to make it easy for entrepreneurs to get a loan up to $50k through an intermediary simply by personally guaranteeing it with their own income and assets. They like these to be collateralized, and that will certainly help your interest rate. Terms are up to six years. To give a basic example, you can take out $20k at 10%, and pay $371 per month for the next six years to pay it off, only incurring $6770 in interest expenses during that time. This would give you all the ammo you need to buy a fancy espresso machine and a microwave to help your new cafe compete with Starbucks. If you charge half as much as your competition, you can cover the entire monthly debt-servicing expense by selling 90 lattes.
3. Friends and FamilyThis can be a great option for many, if the underlying relationship and communication pattern is healthy. You certainly can get rates below what the market is charging, but just know that loans in excess of $100,000 may trigger tax consequences for the lender and Federal Gift Tax consequences for the borrower. More important than these technicalities and unique circumstances though, is what that loan will do to your relationship. Many entrepreneurs take this route, and it certainly has major advantages, but it also has some drawbacks. You need absolute clarity as to the expectations of the loan or grant from both sides, in writing. If you value the relationship, this is not a place to skimp out on seeking professional advice. Make sure to have a plan for what happens if the business fails.
4. BootstrappingThis, and the next nine financing techniques are not as much about using debt and other people's money (OPM) as much as they are about exploiting your own assets strategically. The idea of bootstrapping simply refers to using your cash and pulling your business up by the bootstraps. No, I don't know what bootstraps are, but I envision laces in my mind like you probably do: the point is that this approach isn't fancy, fast, or sexy, and that it requires a lot of grit. Starting a business with practically no money is a conservative approach that is actually very effective for lots of business models. It is a proven gateway to faster profitability, as that is what necessity dictates. This approach works great for service industries you are already skilled in (housecleaning, accounting, auto mechanic) and for low cost of entry product-based businesses (car-cleaning, cell phone repair/resale, ecommerce, car dealing). I have seen each of the aforementioned examples above in practice, and while it is true that most of the entrepreneurs who started these companies grew slowly at first, they are still in business today because they avoided inefficient use of debt.
5. Your Credit CardsPlease, just don't do this.... Credit cards are a bad idea... The rates on credit cards are astronomical because a.) they are not collateralized debt, b.) they are short term by nature, and c.) the underwriting and due diligence is done up front, not at the time of purchase (when you actually buy the $800 Air Jordans you can't pay for). Rates around and above 20% are not uncommon in most interest rate environments. The only exemption I grant clients to use credit cards for is those involved in trading and flipping. Even then, the turnaround has to be literally a week or two, you will blow out your profit margin with a 20% interest charge if you take a month to complete the flip. A simple example I'll use is from a past life in ecommerce. I did a little flipping on the side now and then, and once came across the opportunity to buy boxes of brand new Sony headphones for $100 a piece. I was not in a very liquid place at the moment, so I bought as many as were available with my credit card, and sold every single pair for $200 each the next day. My lack of liquidity was solved. This was a risk, sure, but I did some research first to figure out the velocity of the sale, how quickly my flip would complete. To reiterate, this is the exception, not the norm.
6. Your Life InsuranceBorrowing from a cash value life insurance policy can be a valuable tool when you need it, but is often overhyped by "gurus" on TikTok these days. "Infinite Banking" sounds really cool, the idea that you can borrow from yourself interest free, but fails to take into account the high fee structures of these insurance policies. The cheapest method of obtaining life insurance is Term. You give the insurer money you hope to never earn back during the term you select. Any time you mix investments and insurance, the insurance company gets a little richer. For younger investors and founders especially, it is probably best to keep things simple when starting out and to keep your insurance separate from your investments. True, you can borrow from your whole life policy in a pinch with decent rates, but you have to own a Whole life policy to do so. Yuck.
7. Your Non-Qualified Brokerage AccountsThis is your Robinhood, your Vanguard, or that UTMA thing your parents made for you years ago that became yours legally at age 21. This is often a beautiful place for your money to sit by the beach and sip fruity drinks until you put it to hard labor. You can use it like a bank account, holding your assets in cash or a money market, especially if it is funding your shorter term goals. But if you have longer goals and a higher tolerance and capacity for risk, you can invest in anything you want to in these types of accounts, as you already know. I always start by helping my clients get really clear about their goals. This happens way before we even start thinking about solutions. Non-Qualified accounts are very flexible, and not locked up under threat of IRS penalties, unlike IRAs and other retirement accounts, so they are incredibly useful. I like to use them for intermediate savings goals (starting a business in a few years once you save up enough, buying a house or rental property in a few years, etc.) whereby the assets you put into it can grow if you invest prudently. Typically, conservative funds with lots of dividend-centric stocks and a healthy does of bonds can earn decent little returns that outpace cash for not much risk. Risk is defined as something going up or down in value. You don't want your down payment to be gone when you need it, even if it will come thundering back next year. From a tax perspective, interest and dividends from stocks owned for less than a year are taxed as ordinary income. Capital gains rates apply to your ETFs and stocks that have grown in value at the time of sale. Therefore, you can structure your investment portfolio within your business' account so as to generate capital gains that be offset by whatever capital expense you use the proceeds to fund. There are no penalties for withdrawing from non-qualified brokerage accounts, making them a great option for taking from your own assets to finance your company's growth.One other (somewhat-secret) feature you have with non-qualified accounts is that you can borrow against the securities you own. If you have $100k in ETFs, you can borrow probably near $50k, subject to the rules of your brokerage firm, but probably should not borrow too close to the limit. If the value fluctuates a lot, you may be forced to put in extra cash to your account to keep your loan afloat, which is not fun. This is a good method though when rates are low, because you may be earning better returns on your investments than the interest rate you borrow at, but returns are obviously never guaranteed.
8. Your Roth IRAA Roth is actually a great place to pull capital from if you plan on investing it productively into a business. In pulling from any retirement account early, you want to really stop and check your motives: robbing your retirement to pay for a bourgeoise lifestyle will only lead to long term dissatisfaction. But taking from an investment in an ETF or mutual fund and deploying it into starting your own business can certainly be a good thing. You can pull out the contributions you make to a Roth IRA at any time, even if younger than age 59 1/2. The gains on those contributions are subject to early withdrawal penalties though and should be avoided if possible. In other words, if you have put $5000 into your Roth IRA each year for the last ten years, you have $50k of "safe money" to pull out and use, even if the balance is $90k total because it has grown. Just be really, really careful with your brokerage firm/account when doing this so as to only pull out your contributions. When in doubt, use customer service for help, or talk to an advisor.
9. Your Traditional IRAPulling from a pre-tax IRA (or a SIMPLE or SEP IRA) is not a great way to access capital. You can't take a loan against it, and if you are younger than 59 1/2 then you get hit with a 10% penalty, plus income tax on anything that comes out. This is punitive and inefficient. While I have seen numerous entrepreneurs use this to get a business off the ground and have zero regrets about it in hindsight, you should explore other options if you have them. For these people I have seen, it was the only option they had to make a substantive leap forward, but they wish the IRS kept less of their money to make it possible. In this day and age though, there ae myriad exceptions to get out of paying the 10% penalty (not to get out of the income tax) by proving you are experiencing various hardships. Since the passing of the SECURE ACT 2.0 in late 2022, there are now more ways than ever to access your money, so definitely do some research ahead of time to see if you can find a qualifying reason, but definitely do not try and bend the rules. A business built on lies and deceit (even to the IRS) is a house built on sand.
10. Your 401(k)I once had a finance professor who loved to joke about the government and the mafia. He would first explain how 401k and 403b early withdrawals work, and then paint a picture of Don Corleone calling in Michael and Knuckles, flabbergasted by the federal competition: "With rates like this, they're gonna put us out of business! We can't compete with them!" Indeed, taking an early withdrawal from an employer retirement plan comes at a really steep price that makes the Don's margins look paltry. If you take money out of your 401k early, you are subject to a 10% penalty, and you also have to pay taxes on anything pulled out: these stack on top of each other. On a $10,000 withdrawal, after accounting for both, you will likely receive a net amount of $6,300 depending on your tax bracket, the rest of it going to the IRS. Some employers don't allow you to do this, so in some cases, people have to actually leave their jobs and roll the plan over to an IRA before getting smacked with these penalties if they really need the money. This just makes a bad problem worse.A better way is to take a loan against the balance of your 401k. You get to take some out at an attractive rate, and pay yourself the interest essentially. You are limited by the borrowing limits set forth by your employer though, which is capped at $50k or 50% of your balance, whichever is less. This could be a useful way to fund a side venture while maintaining your current employment, as you don't need to leave your employer to access the capital. You can (and should) repay the loan by increasing the money being withheld from your paycheck to contribute to your 401k.
11. Your Real AssetsThese may include rental properties, natural resources, raw land, gold, collectibles, and even your car. You can tap the equity in your land and properties with the help of a good mortgage broker to help you start something new, and you can sell your gold and collectibles for that same purpose. In high school and college I was quite fond of shooting trap and skeet as a hobby but eventually sold all of my guns and equipment for it to start my first business. I realized early in my marriage that I needed to grow up, put the boyish pursuit of hobbies and recreation behind me, and get to work, creating something of value. If things succeed, you can always buy more toys on the other side, but life is about creating value and being productive, not simply consuming entertainment. This seemingly small (financially speaking) decision has been one of the most impactful ones in my professional life. Beyond selling your stuff, you can rent out your car through companies like Turo to earn some minor cash flow to help provide a little cushion month to month, especially if the business you are starting or trying to grow allows you to work from home. Assets are not meant to collect dust, they are meant to be your tools to help you work more effectively.
12. Home Equity Line Of Credit (HELOC)A HELOC can be a surprisingly good source of funds for funding a safe venture. It is collateralized against a stable value asset (your home) and thus gets a fairly good rate and can have a decently long duration. They are often built to be pretty flexible too, and may operate as simply as a revolving line of credit. The downside of course is that you have to stake your home to use it, putting your family at risk. In practice, I feel better about clients using it simply to buy things they need at lower rates than are available, such as vehicles. By using a HELOC, I've seen clients get a lower rate than what the dealership could offer, and still lower than the performance of their investments they would have had to pull from otherwise. In other words, they left their $30k in an ETF that does roughly 8% per year and used a 3.5% HELOC to buy the car, this felt pretty safe. This option though should only be considered for smaller, safer business startup costs. You do not want to lose your house when your new restaurant fails to succeed, as most do. Isolate your risk, don't let it be systemic and contagious.
13. Private/Public OfferingThis is the realm of investment bankers and venture capitalists, and not for the faint of heart. Multiple funding rounds, hundreds of pages of legal jargon, and incredible requirements to meet are par for this course. This route is likely not worth your time to even think about until your business is worth tens of millions.
14. Angel InvestorsOnce you reach a certain level of assets (even beyond simply becoming an accredited investor), your lifestyle is already secure and you are just looking for good places to deploy capital. Angel investors are constantly seeking diversification from their other investments, and often outperformance compared to the public stock market. They will be happy to invest with you in a variety of ways, ranging from equity to debt and more, provided you and your startup are a good investment. There are so many ways to approach the topic of angel investors that could fill pages, so I'll just leave a succinct note on it. At the end of the day, an angel investor wants to make money by investing in you, and likely knows more about investing than you. This is not bad, and really can be quite good, but you should find some suitable help to aid your decision making process.
15. Royalty-Only InvestorsMr. Wonderful is the best known royalty focused investor on TV. Kevin O'Leary often likes to help get entrepreneurs started by simply giving them a bunch of cash in exchange for a percentage of profits for a set duration, without any equity in the company. If you can land a deal like this, it is definitely worth considering, as it is less burdensome and risky than debt in the short run, and retains your equity in your company over the long run. This approach is still not all that common, but is definitely worth considering. ConclusionIf you've made it this far, you're either a.) Interested in real solutions for your business, b.) nerdy ??, c.) falling down a rabbit hole of reading random stuff and need to put down your phone, or d.) a true perfectionist dedicated to reading all of the financing options for your business without skipping any.Whichever of these categories you identify with, I truly hope this was helpful to you and I invite any and all questions you may have! Just remember, it never hurts to get a second opinion from an expert before taking on ANY form of financing.

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