Fund your business growth

There are many different types of funding to consider when you're looking to grow your business.

You must consider many factors when exploring growth funding options, including:

  • the amount of capital required
  • the nature of your business and its growth prospects
  • your stage of business development (i.e. initial growth or growth to maturity).

Every business will have different reasons for sourcing finance and every funding proposal will have its own unique features.

Learn about the types of funding sources and how to choose the best funding option for your business.

Seek professional advice from your accountant, bookkeeper or tax agent before making a financial decision.

Debt finance

Financing through debt means sourcing funds from a third party and agreeing to pay the money back, with interest, by a future date. Debt funding is often provided through loans from financial institutions, including:

  • bank loans
  • family finance
  • overdrafts
  • mortgages
  • credit cards
  • equipment leasing/hire purchase.

Advantages of debt financing

  • Maintaining ownership – unlike equity financing, your business retains equity which means you continue to have complete control over your business. As the business owner, you do not have to answer to investors.
  • Terms – you may be able to negotiate fixed interest rates and flexible repayment options.
  • Tax deductions – unlike private loans, interest, fees and charges on a business loan are tax deductible. This is a big incentive for debt financing. Learn more about tax deductions for your business.
  • Retaining profits – your only obligation to your lender is making repayments within agreed time frames. You do not have to share your business profits.

Disadvantages of debt financing

  • Accessibility – banks are conservative when lending money. New businesses may find it difficult to secure debt finance.
  • Repayments – you need to be sure your business can generate enough cash to service the debt (i.e. repayments plus interest). If your business fails you are still obliged to repay your debts. If your business is in an early stage, your cash flow may be insufficient to repay debt finance regularly.
  • Credit rating – failing to make repayments on time will affect your credit rating, which may affect your chances of securing future loans or credit terms from your suppliers.
  • Cash flow – committing to regular repayments can affect your cash flow. Start-up businesses often experience cash flow shortages that make regular payments difficult.
  • Personal liability – if your business does not succeed, you may be personally responsible for the loan.

Equity finance

Financing through equity is when funds are sourced from a third party with an agreement to give the investor a share of the business.

The main difference between debt finance and equity finance is that the investor becomes a part owner of your business and shares any profit the business makes.

Through equity investment, the investor is granted a certain percentage of equity (shares or units) in your business. As security for this investment, the investor will generally want some influence over business decisions (e.g. being on the board of directors). Some investors, such as family or friends, may prefer to be silent investors and only contribute the funding due to a lack of knowledge or time.

Main sources of equity capital

Self-financing, or bootstrapping, is where you put your own money into your business without borrowing large amounts of cash. This is often essential in the early stages of a business before you can prove your potential to investors.

Bootstrapping is the fastest way to finance a business as you're not relying on other sources of funding which may require a long application process. You're also risking your own money – you won't be in debt to others if your business doesn't take off.

Being self-funded has many advantages, including:

  • minimal costs (e.g. operating from home to save on rent or leasing equipment instead of buying)
  • potential for immediate profits
  • full control over business decisions, without any direction from investors
  • complete involvement in the end-to-end process of your business.

A bootstrapped business can often struggle with a lack of resources, and your ability to grow may be limited until you can find further investment. You may need to be creative and innovative with how you solve problems and very careful with managing your cash flow and funds.

Asking family members for an equity investment can be a quicker way to access funding. Make sure you consider the following issues before asking for, or accepting, finance from family and friends.

  • Make a formal arrangement – be professional; document the terms of the investment formally. This includes the terms of the investment, how and when the investment would be repaid and the level of interest (if included). This will protect all parties involved.
  • Consider affordability – be open about the levels of financial commitment and risk involved. Consider the implications for friends and family should your business fail or experience any problems – can they afford this.
  • Due diligence – conduct necessary due diligence checks just as you would with any other investment or form of financing.
  • Treat the terms of the agreement like any other forms of financing – ensure you meet your contractual obligations on time.
  • Consider if the response is 'no' – be prepared to maintain relationships if they choose not to take up your offer. It's important that they have a chance to say ‘no’ and not feel pressured into the investment.

A business angel is a high net-worth individual who invests directly into businesses for equity. As well as providing funding, they will usually bring expertise to your operations as someone who may have worked in your industry.

A business angel will want solid returns on their investments either by profits or a share in the ownership of your successful business. Business angels are often entrepreneurs who have been successful and want to give back to their industry.

Business angels will generally invest in early stage businesses and are usually willing to wait longer for returns. Before you commit to partnering with a business angel, consider the potential disadvantages, including:

  • they may try to take over your business because they believe they know more
  • they can be difficult to locate and attract, especially in Australia
  • they may have limited funds and may not be able to provide necessary follow-on funding.

Venture capitalists are fund managers who invest other people's money into private businesses in return for equity in the business. This equity is later released through an exit strategy, such as floating the business on the stock exchange, which can create the substantial return on investment required by the fund manager.

Venture capitalists often finance high-risk projects. You may not need to repay invested funds to the venture capitalist if you don't end up turning a profit, as long as the investment is not in the form of debt. Venture capitalists usually have access to networks which can provide recruitment, potential customers, other investors and partnering opportunities.

Venture capital funding often comes with tighter restrictions than funding provided by angels. This is because the venture capital fund must make a return on investment by a specific date to the owners of the investment money (e.g. 2-4 years). In particular, they want to see how their investment or original equity is protected.

Investment conditions can include the running your business in a predictable way and implementing control mechanisms in case events threaten the investment. The rights of both parties are written in a negotiated agreement.

When approaching venture capitalists, you should have prepared a business plan with:

  • a concise but memorable executive summary
  • financial forecasts
  • business strategies
  • management experience
  • a detailed exit strategy.

This pitch is important for making your business stand out amongst the many opportunities a venture capitalist will be offered.

Venture capital is usually the most expensive way to fund your business. The returns expected will be many times the original venture capitalist's investment, compared with debt funding, which will be a percentage interest rate return.

A public float raises money for your business by issuing securities, such as shares, to the public.

The process of moving from being a private to a public company by issuing shares available for the public or traders to purchase is known as flotation. Benefits include gaining access to new finance and potentially making it easier for investors to realise their investment. You will also need to consider factors like market fluctuations, cost of flotation and your new obligations to shareholders in running the company.

Advantages of equity financing

  • Freedom from debt – unlike debt finance, you don't make repayments on investments. Not having the burden of debt can be a huge advantage, particularly for a small start-up business.
  • Term of investment – equity investors such as business angels may wait for a longer period before returns are realised.
  • Repayments – funds are repaid through an investment exit strategy, rather than through a defined amount.
  • Business experience and contacts – as well as funds, investors often bring valuable experience, managerial or technical skills, contacts or networks, and credibility to the business.
  • Follow-up funding – investors are often willing to provide additional funding as the business develops and grows.

Disadvantages of equity financing

  • Shared ownership – in return for investment funds, you will have to give up some control of your business. Investors not only share profits, but they also have a say in how the business is run. While this has advantages, you need to think carefully about how much control you surrender. This can lead to unfavourable terms when negotiating agreements.
  • Personal relationships – accepting investment funds from family or friends can affect personal relationships if your business fails.
  • Time and money – approaching investors and becoming investment-ready is demanding. It takes time and money. Your business may suffer if you have to spend a lot of time on investment strategies.
  • Availability – certain types of investors, such as business angels, can be difficult to find and attract in Australia.
  • Obligations – your business will have more reporting and disclosure responsibilities.
  • Returns – equity investment may build pressure to create business opportunities that can generate a specific return on investment each year.

Learn more about raising public funds for your business.


Crowdfunding is a type of funding which relies on people to donate money and share networks and resources to support a particular project. In return for their support, 'backers' are offered incentives such as free merchandise, sessions, or products.

This has become a popular way to fund new projects, as small amounts of money can quickly become a large amount when sourced from large groups of people. It allows your business to be validated by your potential customers before you officially launch, and you don’t need to give up equity. It is commonly done through crowdfunding websites.

Crowdfunding is an effective tool for starting or expanding a business. You could use crowdfunding to access capital, support, exposure, and a new customer base.

Reputable crowdfunding websites will allow you to:

  • post your own project profile
  • set a time frame and funding goal
  • list incentives
  • provide an explanation or demonstration of your business or product idea.

Usually, you will be required to set a certain funding target, and your project will only be funded if you receive enough pledges to meet your target. If your project does not raise enough funds to meet your target, anything raised will be returned to your backers.

Advantages of crowdfunding

  • Your project or business is not part-owned by your supporters (unlike other funding investments).
  • Low commitment and risk-free environments let you test your concepts directly with your customers.
  • You can get feedback and grow a customer base for your product before it reaches the market.
  • You can interact with your audience and use social media tools to influence your campaign.

Disadvantages of crowdfunding

  • You must gain the attention of potential backers by taking time to plan, write pitches and differentiate your campaign.
  • There are no guarantees that you will reach your financial goal in the set time frame.
  • You must plan carefully so you can deliver what your project promises.
  • You need to spend time maintaining relationships with backers and promoting to keeping your campaign fresh.
  • You must put effort and imagination into creating unique incentives and rewards.
  • You are competing for public attention against thousands of other campaigns.
  • If you do not reach your financial target in the set time frame you may not be able to take what money you have raised.

Steps to a successful crowdfunding campaign

The following steps will help create a successful crowdfunding campaign.

  1. Plan and set goals—create a detailed, realistic plan that covers your funding goals. This will help you work out how much time you need to reach your target and start your project. Be prepared to commit time to your campaign every day. Successful campaigns are often based on diligence and persistence.
  2. Learn from others—research successful crowdfunding campaigns for ideas on how to pitch and grow your project. Try to find other products or services similar to yours and learn from their mistakes and successes—this may also give you access to potential customers and partners.
  3. Tell your story—identify what makes your idea different and what will make it stand out from others online. Your project doesn't have to be the most innovative—successful campaigns often rely on a good story or 'pitch' to get attention and support.
  4. Interact online—use all your networks and keep talking to them with new updates and reminders. Regular social media posts or emails will stop your project becoming 'stale' and remind your audiences to share your idea with friends.
  5. Thank your supporters—reward and thank your backers for their support in creative ways. You should offer tangible and intangible perks based on their level of support. If your campaign is innovative, you may not need to offer large rewards—people may be happy to simply be a part of something new and interesting.

Crowd-sourced funding

Separate to crowdfunding, crowd-sourced funding (CSF) is a type of financial service set up by the Australian Government where start-ups and small businesses raise investment from a large number of small individual investors.

Under the CSF program, eligible public and proprietary companies can make offers of their shares, via an intermediary CSF service, using an offer document.

To be eligible, you must be an unlisted public company with less than $25 million in assets and annual turnover. Eligible companies will be able to make offers of ordinary shares to raise up to $5 million in any 12-month period.

CSF is regulated by the Australian Securities and Investments Commission (ASIC). Learn more about crowd-sourced funding.

Government grants

Your business may be eligible for financial assistance from the Australian, Queensland or local government. There are a wide range of funding programs for different purposes and industries to help new and established businesses grow and succeed.

The eligibility criteria, amount of funds available, funding conditions and activities differ from grant to grant.

Working capital funding

Working capital funding allows businesses to access finance which covers normal operating expenses when they may be experiencing low cash flow. This is normally a short to medium-term loan which is designed to keep businesses running until they recover their cash flow.

Examples of businesses which may benefit from working capital funding include:

  • businesses with seasonal revenue (e.g. a ski resort may need to take out short-term funding in the summer months to pay ongoing expenses until peak season revenues come in)
  • a business looking to access additional resources to fulfil a larger-than-usual project.

It's expected that this type of capital will be repaid reasonably quickly and is a short-term solution to keep the business running until finance is no longer needed.

Common types of working capital funding

A working capital loan allows you to increase your short term cash flow, which helps your business survive through periods of low cash flow, or to scale your business to meet growing demand for your goods and services. The amount of a working capital loan will vary depending on the size and typical revenues of your business.

You can access both secured working capital loans (where your loan is tied to an actual asset as collateral), and unsecured working capital loans. Unsecured loans are generally only available if you have a high credit rating, so aren't always an option for new businesses without a credit history.

Overdrafts are a more traditional source of funding, where your bank will extend you a line of credit, allowing you to continue to draw money from your business account even though it may technically be empty.

Overdraft accounts will have a set limit and operate like a credit card (the overdraft must be repaid by a certain date before incurring more fees). This can be a valuable and flexible way of securing short term funding that helps you meet your financial obligations through inconsistent cash flow.

The terms of your overdraft will vary depending on your bank, but they can become costly if you don't manage it responsibly. You will often need to pay application fees, interest charged on the amount you overdraw, and then additional overdraft fees. Review the market to find the best available account option for your business.

A revolving credit facility is another form of flexible funding, where you have an agreement with a lender to withdraw money up to a pre-approved amount to fund your business, and continue to repay and withdraw within your limit whenever you need.

This is similar to an overdraft, though you don't need to have an account with your lender, and is more flexible than a term loan, as you can withdraw money, repay it and borrow it again until the end of your agreement. There's no fixed payment schedule, and your interest rate is usually variable.

Many businesses offer goods and services to their customers on credit by fulfilling an order and then issuing an invoice, which may not be due for up to 30 days. Invoice financing lets businesses access loans based on the amount due from outstanding invoices, and is a way to fast-track cash owed for improving cash flow.

This form of lending commonly sees a business 'sell' their invoices to a lender, who takes a percentage of the invoice as their fee for advancing the cash. You (as the business owner) keep control of invoice management and collection, and your customers have no idea that their invoice has been advanced. If your cash flow is only being held up by delayed or late invoices, this can be a great option for funding. Your maximum borrowing capacity will be limited by the total amount of your invoices.

Similar to invoice financing, trade finance and supply chain finance are other options you can consider for increasing short term cash flow, though these are generally only offered to businesses who trade in physical goods.

Supply chain finance is where the lender agrees to advance an invoice for specific buyers. Three parties are involved in this form of agreement: the buyer, the business owner/supplier (you) and the lender. This can be a good option if your customer might have a better credit rating than you.

In this scenario, your customer is approved by your lender, and you may be able to take advantage by offering better payment terms, without affecting your cash flow (your customer can take an extended payment term, while you can still take immediate payment). Like invoice financing, you’ll forfeit a percentage of your total invoice as the fee to the lender (called the discount rate).

Trade finance is almost the same, except that it's a lending arrangement to facilitate international trade, which makes it easier for businesses to import or export orders.

Asset refinancing allows you to use the physical assets your business owns to secure funding. For example, if your business owns property or vehicles, you can use these as collateral to access a secured loan.

This means you may be able to access cash amounts up to the maximum value of the assets you own. If you are unable to repay your financing, these assets may be reclaimed.

Off-balance sheet financing is an accounting method where you record certain assets or liabilities in a way that prevents them from appearing on your balance sheet. It is a legitimate and permissible accounting method that is recognised by generally accepted accounting principles (GAAP), as long as GAAP classification methods are followed.

This can be complex, so talk to your accountant or financial adviser before considering this financing.

Off-balance sheet financing often occurs when your business may need to take on a loan that would breach existing creditor agreements. For example, when a business has a line of credit where they must stay below a certain debt-to-equity ratio, and a new debt would violate this agreement, and trigger a default.

To avoid breach of contract, off-balance sheet financing allows you to acquire a new debt or asset without it being recorded on your balance sheet. This could be through:

  • joint partnerships (liabilities of partners are not reported on a balance sheet)
  • acquiring a small stake in existing entities with their own balance sheets
  • creating separate subsidiaries or entities that may then lease a new asset to the original business.

Operating leases is the main form of off-balance sheet financing, as it allows you to access an asset (like property or equipment) which lets you scale and grow without having to purchase the asset outright. Your balance sheet only reflects the lease agreement costs, and the purchase is recorded on the balance sheet of the new entity. Recording the operating lease as an operating expense on your profit and loss statement results in lower liabilities on your balance sheet.

Optimal funding sources for innovation

The funding sources that are right for you depend on your business needs and can be complex.

Seek advice from a professional, such as your accountant, bookkeeper or tax agent, before embarking on any particular option.

As a rough guide, funding sources are outlined in this table:

Business stage<$10k$10k$100k$2m$5m$50m+
Seed PR PR/G/A A/G VC   
Early stage PR PR/G/A A/G/VC/F VC/F   
Growth  PR/A A/G/VC/F VC/F/SE VC/MB/SE  
Established   VC/F VC/F/SE VC/F/MB/SE VC/F/MB/SE
Expansion   VC/F VC/F/SE VC/F/MB/SE VC/F/MB/SE

Funding source key:

  • PR: Personal resources, family and friends, crowdfunding
  • G: Government grants
  • A: Angels
  • VC: Venture capital
  • F: Financial institutions, banks, credit unions
  • MB: Merchant banks
  • SE: Stock exchange

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