Obtaining expansion business finance is necessary if your business is ready to take a leap, but you don’t have the working capital to do so.
You’re ready to expand your physical location: you have outgrown your initial office location. Or maybe your restaurant or retail store have more customers in and out than you can fit inside your space. Just because your business is ready for expansion, it doesn’t mean you have the cash on hand to do so. In these cases, you may need a term loan. Whether it’s adding an additional location or packing up and moving, the upfront cost and change in overhead will be significant. Before you commit, take steps to measure the potential change in revenue that could come from expanding your space. Use a revenue forecast along with your existing balance sheet to see how the move would impact your bottom line. If you’re thinking about a second restaurant or retail location, research the area you want to set up shop to make sure it’s a good fit for your target market.
If you’re planning to apply for larger-scale financing for your business in the next few years, the case can be made for starting with a smaller, short-term loan in order to build your business credit. This tactic may also help you to build relationships with a specific lender, giving you a connection to go back to when you’re ready for that bigger loan. Even one late payment on your smaller loan could make your chances of qualifying for future funding even worse than if you’d never supplied for the small loan at all.
Purchasing certain machinery, IT equipment and other tools that can improve your business offering to make your product or provide your service, requires a loan to finance those acquisitions. If you take out equipment finance, the equipment itself can often serve as collateral for a loan.
Inventory is one of the biggest expenses for any business. You need to keep up with the demand by replenishing plentiful and quality options. This can prove difficult at times when you need to purchase large amounts of inventory before seeing a return on the investment. If you have a seasonal business, there are times when you may need to purchase a large amount of inventory without cash on hand to do so. Slow seasons precede holiday seasons or tourist seasons, necessitating a loan to purchase the inventory before making a profit off of it. Create a sales projection based on past years’ sales made around the same time. Calculate the cost of the debt and compare that number to your total projected sales to determine whether taking an inventory loan is the right financial move. Sales figures can vary widely from year to year, so consider multiple years of sales figures in your projections.
When working at a small business, you wear a lot of hats. There comes a time when doing the bookkeeping, fundraising, marketing and customer service may start to wear on you and your business. If your small team is doing too many things, something will eventually fall through the cracks and compromise your business model. Choosing to invest in talent can be a great move, if there is a clear connection between the hiring decision and an increase in revenue. If having an extra set of hands around helps you focus on the big picture, that alone may be worth the loan cost.
Contact us for assistance with obtaining expansion business finance for your company.