Every company will look to expand one day, but only a select few will get the privilege. Expanding is a sign that your business is succeeding, and far too many businesses fail in the current climate. But, before you can pat yourself on the back, you need to secure finance to bankroll the project.
After all, expansion is costly and is hard to finance alone. The problem is you don’t want to turn to a bank because you have bad credit and could get rejected.
If you are very certain expansion is your best bet and you are ready for it, start financial clean up as soon as possible. This is a great time to clean up your financial records–recent balance sheets, revenue statements, tax filings, and any other relevant data–as you’ll likely need these documents for your funding application.
So, what are your options?
Borrowing money from family and friends can be a perfect solution.
Firstly, you can always turn to your friends and family if they have the cash to lend. Going to friends or family with your hand out is not a preferable option for most people because it involves asking for a favor. The majority of us are that proud that we cannot stand the thought.
So, instead we skip down to the bank and sign our lives away without a second thought. Although it is going to be awkward, the rates are much cheaper and a lot healthier. Plus, if it doesn’t go well, you won’t lose your house, your car or your business.
You’ll find that most people will be happy to do you a favor if they have the chance. To make sure you don’t sour your relationship, have a look at http://lifehacker.com for tips and advice.
Plough back profits: Internal financing is also ideal for business expansion.
Unfortunately, not everyone’s friends and family have a cool hundred grand lying around that they can lend. So, it is time to explore another option. If you don’t want to get into debt or overextend your business, you can always do it organically.
That is to say, you can use the profits from your successful business and invest them in the expansion process. most Businesses usually grow by ploughing back profits to expand new initiatives, projects or open new offices.
It goes without saying that you need a healthy brand to finance any growth. But, if it is a realistic option, it is a great way to stay debt-free. The risks are still high because your cash flow will diminish, but that is your decision to make.
You can try private lenders if other options don’t work.
For most businesses, expanding without external help is a pipe dream. The odds are that you will always need some financial help if you are to achieve your dream. Obviously, the banks are out of the question, so you need to think more creatively.
Luckily, banks are not the only companies that lend money because private lenders also specialize in finance. There are some cowboys out there to avoid, but the majority is very good. Just visit www.businesslendermatch.com if you are a non-believer. But, don’t take my word for it – do some research of your own and find out what the potential pitfalls are before making a commitment.
If you choose to go for financing from lenders, it’s important to understand lender’s requirements, so that you can prepare for the application process and make sure it’s a good fit for your business.
When applying for expansion financing, lenders want to see that your business is cash flow positive, and that you can repay debt and don’t already have too much of it.
Always borrow only what you need. Before you borrow, think about other ways you can come up with extra money to expand your business without incurring debts your business may not be able to pay in the future.
How about Crowdfunding?
If you have a loyal network of customers who are excited about your plans for expansion, you can consider whether crowdfunding some or all of your expansion through a platform like Kickstarter is the right move for you.
As you give loyal customers a sense of ownership in your company, these excited micro-investors can act as brand ambassadors, helping generate buzz about your new location or expanded business model.