OPM, or Other People’s Money, refers to the practice of using borrowed funds to invest in and grow your business. The concept is rooted in the idea that you don’t always need to use your own capital to finance your business ventures. Generally speaking using your own funds will only take you so far. Leveraging external sources of funding will allow you to achieve your goals faster and more efficiently.
Benefits of Leveraging OPM for Business Growth
- Preserve Personal Capital: Using OPM, let’s you keep your personal savings intact which means you’ve got a safety net for unexpected expenses.
- Accelerate Growth: Access to external funding allows you to invest in opportunities that you might not be able to afford with your own money, such as expanding your product line, entering new markets, hiring new or more staff or upgrading technology.
- Enhance Cash Flow: Leveraging OPM can improve your cash flow by spreading out the cost of investments over time, making it easier to manage your finances and maintain a healthy cash reserve.
- Build Creditworthiness: Successfully managing borrowed funds can help you establish a strong credit history, making it easier to secure future financing at favourable terms.
Types of Funding in Australia: Loans, Investors, Credit Lines
There are several ways to leverage OPM in Australia, each with its own advantages and considerations:
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Loans:
- Traditional Bank Loans: Major Australian banks offer business loans with competitive interest rates and flexible terms but may require collateral, a strong credit history and length of time in business.
- Small Business Loans: Unsecured cash flow lenders, provide loans specifically designed for small businesses with a quicker application process than traditional banks and flexible repayment options.
- Government Grants: The Australian government at Federal, State and Local levels offer various and grants to support small businesses, such as the Regional Investment Corporation loans for rural businesses. There are people who specialise in finding these grants and helping Businesses apply for them.
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Investors:
- Angel Investors: High-net-worth individuals who provide capital in exchange for equity or convertible debt. They often offer valuable mentorship and industry connections.
- Venture Capitalists: Firms that invest in high-potential startups in exchange for equity. They provide substantial funding and strategic support but may require significant control over business decisions.
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Credit Lines:
- Business Lines of Credit and Overdrafts: Australian banks and financial institutions offer revolving credit lines and overdrafts that provide flexible access to funds, allowing you to borrow and repay as needed. They are ideal for managing short-term cash flow needs.
- Credit Cards: Business credit cards offer convenience and rewards but should be used responsibly to avoid high-interest debt.
Real-World Examples of Australian Businesses That Successfully Used OPM
- Atlassian: In its early days, Atlassian leveraged funding from venture capitalists to scale its operations and develop innovative software products, eventually becoming a leading player in the global tech industry.
- Canva: Canva raised capital from investors to expand its platform, enhance its technology, and grow its user base, transforming from a startup into a widely used graphic design tool.
- Afterpay: By securing funding from investors, Afterpay was able to develop and expand its buy-now-pay-later service, becoming a major player in the fintech industry.
Leveraging OPM can be a game-changer for your business, providing the financial resources needed to accelerate growth and achieve your entrepreneurial goals. By understanding the different funding options available in Australia and strategically using external capital, you can propel your business to new heights without depleting your personal savings.
If you’re interested in exploring your options, then we invite you to Make A Time To Chat with Leanne and find out what just what might be possible for you