Traditional finance for high-growth businesses may not always be available, and even when it is, it is typically contingent on the founder’s personal financial situation and the company’s current income. While larger companies can turn to banks and other financial organisations for funding, emerging entrepreneurs must often look for alternate sources of funding to expand their businesses.
In order to increase operations and develop our product roadmap, I decided to look into alternate financing possibilities for my own company. I opted to raise a small amount of debt equity in conjunction with a substantial, revolving credit line to help speed growth.
Here’s how and why I’m using a credit line to expand my business.
Obtaining a credit line
To begin with, I approached a local lender who could issue a credit line of $3 million.
Due to their “legacy” approach to underwriting, banks frequently cannot extend a line of credit to a startup or small business, particularly those without years of operating history.
As a result, it was obvious to us that we needed to provide lines of credit to our consumers. Our credit facility enables us to issue lines of credit to our customers, quickly expand our product offerings, and incorporate debt into our capital stack in a way that lowers our long-term cost of capital, which makes sense for our company.
I opted to use alternate financing to increase our offerings: in October 2021, we closed a $77 million funding round, with $75 million coming from a revolving credit facility and the rest coming from stock. Later this year, we’ll complete an all-stock acquisition to strengthen our technology and product roadmap.
How did we do it?
Raising a credit facility to support all of our clients’ spending made the most sense for our business strategy.
