Do you wonder how you can catch up market share for your e-commerce business?
You don’t have enough cash, and you don’t want to give up equity or the time it takes to secure venture capital.
Don’t worry, you have more alternatives NOW. Non-Dilutive Funding is the answer to establishing a competitive edge.
Any capital that a business owner receives that does not force them to give up stock or ownership is referred to as Non-Dilutive Funding. Many entrepreneurs must get their startup, small business, or full-fledged enterprise off the ground.
It is essential during a company’s early phases of development to ensure that it can continue to build equity. This article will discuss various types of Non-Dilutive funding that play a key role in businesses.
Let’s dig deeper.
Non-Dilutive capital is any funding that does not need you to sell any of your company’s equity shares. This allows you to retain complete control over your company and Growth Capital. Debt, grants, and donations from friends and family can all be sources of Growth Funding. Non-Dilutive money is typically the catalyst for many startup owners to get their businesses up and running.
Donor donations, tax credit programs, vouchers, grants, competitions, and even family are examples of Non-Dilutive capital. Such investment is usually seen to be most effective during a company’s startup phase, but businesses of all sizes employ it at various phases of development.
- Tax credits
- Grant award
- Licensing and royalties from product
- Loan from family and bank
Crowdfunding (collecting modest sums of money from multiple people, usually through an internet appeal) and family loans (revenue raised from relatives) are risky. They might cost a company’s reputation, especially if they don’t work out as planned.
Crowdfunding entails reaching out to many people, usually through internet methods, and asking them to contribute small sums of money to a project. Trust and brand legitimacy are essential for successful crowdfunding, but it also comes with the danger of unpredictability.
A successful crowdfunding campaign necessitates investment in content production that entices people to donate, usually by tugging at the heartstrings and emphasising the emotional side of the business. Some entrepreneurs entice crowdsourcing by giving limited runs of early versions of their products, which necessitates a capital investment. Crowdfunding websites take a cut as well.
- Tax Credits:
Tax credits are deducted from your firm’s owed taxes, but they require the corporation to spend money upfront. Companies that meet the criteria can receive either refundable or non-refundable credits. The former permits owners to obtain a cash refund after paying all their taxes, while the latter uses a direct cash infusion to pay income tax. On the other hand, Vouchers are a type of government aid that allows businesses to obtain properties.
- Grant Award:
Grants award is one of the most valuable and sought-after kinds of Non-Dilutive funding, and we believe they are well worth pursuing. Grants assist organisations in funding activities and processes that add to a company’s value, such as product development, clinical trials, and design.
All these operations help a company develop a viable product or service, at which point it is valuable enough to consider selling off shares.
As opposed to loans, grants are an excellent source of Non-Dilutive funding because they do not require repayment. When you take out a loan, you are obligated to repay the lender, generally with interest. With a grant, you’re free to use the money any way you want.
- Licensing and royalties from product:
A product licencing royalty is a charge paid to a licensor in exchange for the right to manufacture, use, or sell a product. This product could be anything from ice cream to a disease-detection medical scanner.
Royalties are normally calculated as a proportion of the sales of licenced goods. The product might be patented, which would safeguard the invention and prevent it from being replicated. The licensor has the option of licencing the entire product or just a part of it.
- Loan from family and bank:
Loans that are accessible in formal and informal transactions are the most straightforward approach to inject Non-Dilutive cash into your company. While informal loans (those from family and friends) may be forgiven, traditional loans frequently involve credit checks, collateral, and guarantors, as well as payback at various (often higher) interest rates.
This makes informal loans appear more appealing, but they come with their demands and relationship management issues. Banks are also major sources of providing loans in dilutive funding. Go and avail all these options you have for your business.
Overall, Non-Dilutive capital is very inexpensive, and most businesses have other options for financing. It’s also not uncommon for firms to have raised venture money in the past and then raise a Non-Dilutive round. This will minimise your overall cost of capital while preserving you and your previous investors’ equity.
Some organisations do the opposite and raise a Non-Dilutive round first to avoid raising an equity round later. You get money without giving up any stock using Non-Dilutive Funding. It is a crucial distinction for any company but especially for smaller businesses seeking to compete in the competitive world.