Why I’m using a Credit Facility to grow my Startup

When it comes to funding, the experiences of startups and established businesses will be significantly different. Traditional finance for high-growth businesses may not always be accessible, and even when it is, it is typically contingent on the founder’s personal financial situation and the company’s current income. While bigger firms may turn to banks and other financial organizations for funding, emerging entrepreneurs must frequently 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 funding possibilities for my own firm. I opted to issue a small amount of debt-equity in conjunction with a substantial, revolving credit line to help speed expansion. Here’s how and why I’m using a credit line to expand my business.

Obtaining a credit line, to begin, I sought a local lender who could issue a credit line of $3 million. Due to their traditional approach to underwriting, banks frequently cannot extend a line of credit to a startup or small firm, particularly those without years of operational 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 alternate finance to increase our offerings: in October 2021, we concluded a $77 million funding round, with $75 million coming from a revolving credit facility and the rest coming from stock. We’ll complete an all-stock purchase later this year 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 company strategy. Building credit for your small business may help you in a variety of ways. It can make obtaining certain forms of finance, company insurance, or payment conditions with suppliers simpler (or less costly). It may even assist your company in obtaining big commercial contracts.