External funding or investment is required in a company during its growing stage. After it is well established and goes to a sublime position, the funding can also be shifted to internal sources. A capital investor needs to realize the potentiality of the product made and then decides about external funding. When a business is set up, the question arises of when to receive external funding. We will be discussing the signs of when your business needs external funding.
When you know your product
Confidence is the key to business. Know your product and its utility to people. When the purpose of your business is clear go for external funding. Investors look for a well-framed business plan and how much the product can deliver. The product should be appealing to the people who should be benefited through it according to the purpose they serve.
Presence of a good team and a well-planned business strategy
Business is just not about making your product but having a reliable team who are comfortable with the business and is innovative when it comes to their work. Also, a well-furnished business strategy is required. This strategy works as a protocol for the team which needs to be followed. If you are confident and ready to take the risk, seek for external funding.
When assets need to be purchased for the company external funding can come handy. Asset purchasing comes In when your business is expanding and the market has a demand for your product. When raw materials or products for innovative ideas is required assets needs to be brought to expand the business. This is a sign that your business requires external funding.
When your business is stable but is facing saturation it is obvious to think if expanding the business in different sectors. To incite growth of your business in the market, external funding is required. Plan out something new and add upon ventures that may attract investors. Generally getting investors during a business growth is not as tough as it is for a new startup. Also, try focusing on expanding slowly and one sector at a time henceforth managing investors and external funding comfortably.
If your company have debts like credit loans or bank loans and repaying them is harming the productiveness of your company, it shows a sign that your business requires external funding. Also if there is any necessity on buying the asset or raising capitals indirectly and independently, like expecting high credit score to apply for a mortgage, external funding can be reliable to reduce that depth. This will help refinancing the company and start afresh without any financial lag.
The above list is the main guidelines one should keep in mind as a sign of external funding. The most delicate position of a business that is its developing stage where investment from external sources is necessary. This also helps in expressing the product to the market.