Regardless of which industry your business is in, you must have access to financing to make the company successful. Flexible financing is beneficial for any type of business, but it is especially important for those in the healthcare field. Medical advancements are being made every day and keeping up with new technology is expensive. Funding a new diagnostic tool or medication is an expensive process, so you need to know how you plan to source your financing before you launch the company.
Besides startup costs, it's crucial to secure sufficient financing to enhance your working capital – the funds necessary for daily business operations. This not only helps in covering unforeseen expenses and meeting payroll but also ensures smooth business operations. Moreover, financing can boost your cash flow by offering a lump sum that can be used to offset expenses, which would otherwise deplete your operational cash flow, thereby preventing potential cash flow issues and ensuring business continuity.
Typically, there are many ways to obtain the financing your business needs to succeed and each one has its own advantages and drawbacks. Here are five ways you can secure the funding you need for a company in the healthcare industry.
The primary benefit of pitching your company to a venture capitalist such as S-Cubed Capital’s Mark Stevens is the expertise that this type of investor brings. Many venture capitalists are looking to diversify their portfolios, so approach candidates who are interested in your field but do not currently finance a company in the same industry. The right investor will be passionate about your company’s mission and have connections to other companies and individuals who can provide your business with the tools it needs to take off.
However, if a venture capitalist is your first choice for financing your company, you need to be prepared to make an excellent pitch. Rather than just outlining the facts of your company, you should try to weave them into a story-like narrative that is tailored to catch the interest of the person you are pitching to. For example, if you know the investor you are talking to loves fishing and your company sells an innovative arthritic cream that makes it easier for people to enjoy their favorite activities, weave fishing into your narrative. Doing the research beforehand can be time-consuming but it will pay off if it keeps the attention of potential investors.
Many people choose to secure commercial financing by taking out bank loans. You have the option to secure specialized loans that are designated for specific uses or obtain flexible financing which can be used for any purpose. Regardless of which type of loan you choose, you don’t have to worry about funding being pulled unexpectedly as long as you make the payments on time. In more cases, you’ll have many years to pay the loan back so you don’t have to worry about keeping investors happy. However, you usually have to have excellent credit to qualify for a bank loan.
However, it’s important to know that securing financing often means dealing with banks, some of which might require collateral. Hence, if providing collateral is not an option for you, there are other financial institutions offering an unsecured business loan that could be the solution.
If you have a lot of friends or family members who truly believe in your company’s products and mission, you may choose to try crowdfunding. This avenue of public financing allows anyone to donate any amount of money to your business. You can set up a grassroots campaign and advertise your product at local community events while people donate to your company. You can also use a social media campaign to spread the word about your business and encourage people to donate to the cause.
Crowdfunding offers a unique advantage – it allows you to reach a large number of potential donors swiftly and transparently. As most crowdfunding platforms mandate fundraisers to furnish detailed information about their projects, including fund utilization plans, donors are more confident about the cause they're contributing to.
Moreover, a successful crowdfunding campaign helps you connect with potential customers, supporters, and collaborators, turning into a valuable asset for your business. However, it's crucial to remember that a crowdfunding campaign's success isn't guaranteed, and some risks are associated with it. Still, the potential benefits usually outweigh the risks, making crowdfunding an effective method to raise funds for your business.
If you have a lot of money saved up or are fortunate enough to come from a wealthy family, you can choose to finance your company with your own savings. This is a risky venture because your livelihood depends entirely on the success of your business. If the startup fails, you lose all of your savings and have to start over. However, if the company takes off, you have the opportunity to drastically increase the amount of money you have in savings. The primary benefit of choosing this avenue of financing is that you have complete control over how the funds are used and how the company grows.
Angel investors are people who agree to finance your business endeavor in exchange for a stake in the company. Although you may have to give up a share of ownership for your business to attract an angel investor, you will likely gain numerous business connections that increase the likelihood of your business thriving. Similar to venture capitalists, angel investors often have invaluable business experience and can help you navigate the pitfalls of launching a company in the competitive marketplace of the healthcare industry.
Securing the right type of financing for your business is vital for running a successful business. If you plan on launching a business in the healthcare industry, finding financing is more complicated because you may need flexible funds that can be used in many ways since the medical industry is constantly evolving. There are many ways to obtain the financing you need to run a thriving business and because they each offer specific advantages, it is important to carefully analyze your options before deciding which one is best for your business. These five financial solutions provide great options for businesses in the field of healthcare.