How Growth Financing Increases Revenue for Tech Companies? by@tanishamittal

How Growth Financing Increases Revenue for Tech Companies?

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Tanisha Mittal

Tanisha Mittal is a digital marketing executive who loves to explore recent Trends.

The urge to generate higher revenue in tech companies is on the next level. The companies who depend on their own finance often complain about revenue. To generate more revenue and then profit, they need investments. These investments are widely used in the marketing and sales department. But the problem is how to get funded? And how to get growth funding for tech? 

According to business reports about 2021, more than 60% of businesses were able to convert their revenue into a double with the help of growth financing. For example, Webscale, an e-commerce platform, raised $26 million to accompany its 108% growth in 2020. As companies continued to online sales during the pandemic, e-commerce companies grew with that transformation.

Another tech company, WireWheel, an Arlington, VA-based software startup founded in 2016 that secured $20 million in growth financing to expand its reach to SMEs that want to provide greater transparency to customers. Their product provides solutions that helps customers see what data is collected on them and how it is used.

Markets and companies continue to develop, new potentials are discovered, and ideas are in demand and want to be realized. Being able to seize market opportunities is an important basis for being able to grow successfully. But one engine is seldom enough for successful progress. This applies to both corporate strategy and corporate financing. Anyone who relies solely on the classic sources of finance equity and credit leaves important potential untapped - especially when quick strategic decisions focus on fast and tailor-made financing.

An effective and safe growth financing that is tailored to your needs does not come today, and more often from a bank. In the following, we will shed light on the topic and introduce you to bank-independent solutions. A change has taken place in the area of ​​growth financing in particular, which offers you new opportunities to move your company forward efficiently and quickly.

How Growth Funding is Helpful for Tech Companies?

As a tech company, do you already have a certain position in the market, and are you planning the next growth step? Growth financing enables you to realize your internal or external expansion projects. What are you going to do? What are you aiming for? Do you take the time in advance and check how your company should expand and what goals you want to implement?

In recent years, the framework conditions in the financial sector have changed significantly, especially for lending to small and medium-sized enterprises. As a result of the financial crisis, many banks had to review and adapt parts of their business. And that also had an impact on the important instruments used to finance growth.

Growth financing can take many forms, from lines of credit extended by a traditional bank to SBA loans from the federal government’s Small Business Administration. Businesses may seek out venture capital or angel investors, or they may consider going public with an IPO of stock. All of these can bring in substantial funds, but some of them are challenging to access, while others require significant size, time, and documentation to begin. Companies may also use vendor and seller financing, payment plans provided by certain suppliers. In the first of those, companies may offer discounts in exchange for a commitment to purchase a product over the long term.

Benefits of Growth Financing

Liquidity: Companies can invest without the need for equity or debt capital. By conserving important liquidity reserves, the lessee has more financial leeway.

Balance sheet neutrality: The leased objects do not appear on the lessee's balance sheet. Only the leasing installments are posted as operating expenses in the income statement.

Permanently calculable: Seen over the entire contract period, the leasing rates are firmly agreed and thus serve as a secure basis for calculation.

Pay-as-you-earn principle: The installment plan can be adapted to the individual cash flow or turnover over the entire term. Because the installments are incurred in parallel to the use of the object, the leasing object is more or less self-financing.

Individuality: Due to the contract design adapted to the respective needs, contract parameters such as duration, amortization, and payment history, as well as the method of payment, can be designed very needs-based.

Tax advantage: Terms can always be designed individually. The following applies: the shorter the term, the higher the leasing rate.

Value-added tax advantage: For companies, the value-added tax due on purchases, loans, and hire-purchase does not apply to the purchase price.

Final Words

Companies want to expand to realize new opportunities, bring in staff and inventory, expand their product lines and attract new customers, all in an effort to enhance profitability and improve the bottom line. Growth financing helps achieve these goals.

For companies wanting to take their achievements to the next level, growth financing can provide the resources necessary to make it happen. Alternative lenders offer speed, flexibility, and simple application processes well suited to small and mid-market businesses.