The 7 Most Common Hurdles to Raising Growth Capital—and How to Overcome Them

It’s the fourth quarter of the year, and many business owners are working on their business growth plan for 2025. This includes growing revenue and profits by increasing sales to customers, introducing new products, and adding team members. Or course, to support these initiatives, businesses also need to raise growth and working capital.

Recently, I was talking to one business owner who assessed that at this stage of their company, they had four hurdles that impacted their ability to raise the funds needed to execute their plan.

I assured them that the hurdles they were facing were not unique. In fact, each of them was a subset of the seven most common hurdles that hinder small businesses from obtaining the necessary funding to pursue their growth objectives. Since these are so common to so many businesses, I wanted to share them — and their solutions.

Here are the seven most common hurdles to raising capital, and what you can do about them.

1. Financial health

This hurdle relates to either the methods you use to track and monitor your business financial activity and performance, and/or the methods you use to report your financial activities and performance. They’re not representative of a company ready to receive $500,000 from the type of funders you’re interested in.

Solution: This can be solved by working with a qualified accounting firm that has two key qualifications: 1) They have experience providing accounting and bookkeeping for business similar to yours, and 2) they have helped implement improvements that help their clients obtain $500,000 in funding.

2. Revenue weakness

This hurdle has to do with the consistency and predictability of revenue your company generates. Do you have a multi-year track record of generating these revenues on a consistent and ideally growing basis? Do you have significant fluctuations in the amount of revenue your company generates month to month, or year over year? Do you have contracts in place that demonstrate you have timely, incoming payments and cashflow for services delivered?

Solution: This requires looking at how you are tracking and reporting revenues on at least a monthly basis. You want to have contracts in place with your customers that detail the agreed upon services to be delivered, including the timeframe and payment terms. It may take some time to work through this with your customers, and you have to implement these changes with new customers going forward.

3. Excessive Debt

This hurdle occurs for businesses that are unable to generate sufficient revenues to service their outstanding debts and other operating expenses and still have cash left over. This is commonly found with businesses that take on debt with frequent payments, either daily or weekly. Many merchant cash advance loans require this, which becomes a real problem when business revenues only arrive monthly or quarterly. In this scenario, cashflows are misaligned and the business is paying out more, and frequent, debt payments than they have coming in via revenues.

Solution: Put together a plan to pay off those MCA debt payments. This may require you to contribute to the company to pay down or pay off these loans. If your business is generating consistent revenues, though, you may find a mission-driven alternative capital lender who can support you with refinancing these loans. For example, at Founders First we’ve helped many companies navigate out of this scenario.

4. Tax challenges

This hurdle has to do with unpaid federal or state tax obligations.

Solution: Obtaining a solid validation from a state, federal, or payroll tax agency is needed to make sure you don’t have this issue. During the verification process, if you find you do have outstanding tax debt, this can be resolved in one of three ways. 1) If you have the resources, you can pay the obligation outright. 2) You can enter into a payment plan and then pay those obligations on a schedule. 3) With the support of your accountant, you can make sure you have escrow funds or an outsourced payroll service to make your tax payments.

5. Commingling of funds

This hurdle occurs when you mix business financials with personal financials, either using company funds to pay personal expenses directly or moving the funds into a personal bank account for personal expenses. Or you’re using a personal bank account to pay for company expenses. All are bad.

A financially stable company uses a separate business banking account to conduct all business transactions. There must be no cross-pollination with business and personal bank accounts. That means no using business financial resources to directly pay personal expenses like house payments, groceries, or car payments.

Solution: Set up and maintain separate business and personal accounts as well as accounting, and never mix up the two.

6. Invalid use of funds, or not having a growth plan

This may sound like a given, but believe me, it happens. You can’t raise business funds for personal uses like purchasing a home or taking a vacation. These funds are to be used to grow your business, not finance personal expenses. A lender will turn you away immediately if that’s what you propose.

Solution: Have a plan in place about how you intend to utilize these funds to support the direct growth of your business revenues and profits. This may mean hiring, buying equipment, or investing in marketing activities.

7. Failure to submit timely information

This hurdle has to do with prioritizing and sending along the right information on a timely basis.

Solution:You have to prioritize this and allocate the time to get this done. Engage the right professionals as needed and make sure you submit everything on time and in good order to prospective investors.

Most business owners are so busy leading their company they may not be aware that these hurdles are holding them back from receiving the funds need to support their growth.

You’ve built a great business. You shouldn’t be penalized or have your growth stunted because you have hurdles like these. Don’t panic, though. You can overcome them. Good luck with your growth planning for 2025!