Financing Business Expansion for Your Small Company
How you finance the expansion of your business is important. Borrowing and understanding the consequences of borrowing for your financing is extremely important. If you are going to borrow the money to finance the expansion of your business, you need to make sure that you are not going to get yourself into a cash crunch situation. This is where you are going to have a lot of money coming in from new business completed and invoiced but not have enough current cash flow. When you borrow you will be financing new equipment, locations, signage, or perhaps a new work truck on a credit line, lease or loan payments. The initial payments are going to be due before you get your increased income from the expansion in. This can be a major critical problem and we do not want this to happen to you.
When you finance your business location or expansion, you need to make sure that if you will be borrowing and will have to pay that money back with interest charged on the various loan programs. This is going to cut into your cash flow. You could also charge the equipment on a credit card, which is about the same rate as an equipment business lease. Maybe even a little less believe it or not.
The easiest way to get financing for expanding your business is to go down to your bank and get a loan. But you are not going to be able to get a loan if you have been hiding all the cash from your business, not making any deposits. That is something to think about. So many small entrepreneurs start out on the wrong foot hiding or skimming cash, then when they need to expand they have no proof of income or sales and cannot get qualified for a loan.
Now you may be in a position with your business where you can just pay outright for an additional units, equipment, locations or outlets, if this is the case hats off to you're my friend you are truly in a good position. This is a great position to be in but remember that if you put the money out in cash, you no longer have use of that money for other business needs. But it is a nice position to be in to be able to pay up front as your business grows. Remember though, some business investment assets are easily financed while for the purchase of others it is often easier to pay cash or just write a check.
Pkay then you are all set and have determined that the business needs to expand to take advantage of increased sales opportunity in your market place. So, Where to Get Financing? When financing your business expansion, there are many important factors that can make your task a total nightmare (the loan from hell) or extremely easy and a relative piece of cake. The smartest way to finance your business isn't the easiest. The easy way is to pay for it your self out of savings or use a credit card. Unfortunately if you take money out of savings that was there in case of emergency or for a down payment for your house or something equally important, this may put you in jeopardy later if you need that money.
The SBA would be a nice way to go but it takes a long time for them to approve a loan. If you own a home they want you to put it in the loan as collateral in case you don't pay your loan back. By the time they give you the money your investment opportunity is often lost. That big account you got that would nearly pay for all the new equipment has to be started ASAP. If you finance through the SBA 7(A) program, they will not let the loan term extend beyond the term of your franchise, if you are a franchised outlet. You may also be required to pay that loan off before you get any others
In summary, when doing business with the SBA you will: Pay more as a down payment; Spend more time in the approval phase; Need more collateral; Face shorter repayment terms; Be very aggravated by the whole process.
Approval of Credit for simple business bank loan takes time. If you are trying to get credit from your bank or from an SBA loan or something like that, it takes time. Be prepared to wait anywhere from several days to several weeks for approval. You need to factor this in if you are thinking you want to have a new location or more equipment for your current operations. If you need to expand look at your bottom line, can you afford it? Will your cash flow be able to handle the new debt if you are delayed for any reason from local building regulations, an inopportune lawsuit, competitive changes in the market, downward sector rotation in your industry. Think long and hard about these issues and if you decide to go for it, check all your options, interest rates, pay back periods and do what is best in the short term and the long run.
"Lance Winslow" - If you have innovative thoughts and unique perspectives, come think with Lance; www.WorldThinkTank.net/wttbbs
More Resources
Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exitingMore Strategic Planning Information:
Related Articles
Questions to Ask Yourself When Starting a New Home Business
I love the excitement of starting up a new home based business. I enjoy trying out new ideas and approaches with the new venture.
Memo: Sustaining Growth in Your Business
What gets measured gets done.How do you keep your business growing? How do you ensure the health of your business and your personal income against threats from competition, market cycles, commission payout changes, regulation of all kinds, and the human threat of complacency?The answer isn't to run faster on the same treadmill.
Under Construction During the Storm - A Hurricane Guide for Businesses that are Under Construction
As a business owner, you've likely created a hurricane plan for your business and your family, but did you overlook your construction project? Don't worry, you're not alone. Most people don't even think about preparing their construction site because it's not written into their "construction timeline.
How to Snuff Out the Competition Without Leaving a Mark
Does the competition drive you crazy?Are they relentless about taking your clients away?Are customer loyalties becoming a thing of the past?In our ever changing world, it seems securing business these days comes down to, who will provide the most service at the lowest possible price.To add insult to injury your previous customers have taken on a new militant attitude about obtaining your services.
Why You Need a Business Planning System NOT a Business Plan
When someone mentions business planning we have been conditioned to think about writing a business plan. There are hundreds of books and articles, tons of software, an army of consultants, and a multitude government programs to help you write a business plan.
Abstract Thought; Business Strategies and Biological Systems
To stop a computer virus you must understand how it works, grows and what it's innate purpose is? What is its program, evolution and future vectors. The fastest way to expand a business or exploit a competitor on a sports team is to use the organizational patterns of nature like swarms, ants, and viruses.
Mobile Franchise Business Expansion Strategy
If you own a mobile franchise business and wish to expand you will need to have a strategy that involves your franchisor. Additionally if you are a franchisor it is important to have some sort of policy in place in advance so that there are no hurt feelings as franchisees expand.
Creating a Vision That Achieves Results
How important is a vision statement to your company or division? Well, have you ever thought about embarking on a journey without knowing where you are going? The same can be said about running a company, without a vision statement you are going places but who knows if it is in the right direction or even if you want to go there.A vision statement should paint a picture of what you want your business or division to look like in the future.
6 Steps To Laying Out Your Competitive Strategy
Why do so many companies languish and watch as their business turns into a zero profit zone, while others seem to thrive?When you look at your business, whether it's a new venture or a company with a long history, can you answer the following questions?What does my company do better than anyone else?What unique value do I provide to my customers?How will I increase that value next year?Companies that fail to answer these questions, and don't believe they are of paramount importance, relegate themselves to marginal profitability at best and failure at worst. But companies that can answer these questions are able to raise the value bar for their customers and reap the benefits of success.
Business Process Methodologies
I've either been involved with or held a process-related role since 1994. It started in the government with TQM (Total Quality Management).
Scheduling of Additional Auto Detailing or Mobile Car Wash Units
If you own a mobile car wash business or auto detailing business then you realize that when you are parked working you are making money and when you are stuck in traffic you are losing money. Sure you can say when you are in traffic people see you and write down the phone number, but you are not making money, that is potential future income, which is work you still must do in the future.
Bounced Checks in Your Business Location Outlets
The new check cashing instant clearing will take some time to get use to. If checks clear immediately and deposits take a few days then franchise outlets may find more bounced checks in their establishment.
Turning On The Lights
Fun From The StartFor those with the will to start a new business the rewards, both financial and emotional, can be excellent, but the risks can also be significant to both sanity and mortgage. Of course, the chance of success increases if a company has a good, well thought through strategy before they strike out.
Strategic Planning Consulting
Strategic planning and consulting is the strategy roadmap to manage business very effectively. To improve the performance in each business level, business strategic planning & consulting is essential.
Troubled Waters Require Capable Leaders at the Helm
Canada's lean leaders need to look beyond the horizon and chart the futureIn stormy times, true leadership skills emerge, says Larry Coté, the President of Lean Advisors Inc. (www.
Have You Identified the Enemy?
One of the most powerful driving forces in human nature is competition. The desire to overcome something or some company, the need to win, the cause, can in many cases be more important than the day-to-day work of the company.
Action Planning
ACTION PLANNING: Action Planning is a process to develop strategies for changes in the organization based on an analysis of the problems which precipitate the need for change. It is a collaborative method of planning which involves the people working in the organization and permits the people who will be influenced by the decisions and change to have influence on the product or outcome.
Microsoft Great Plains Implementation: Placement/Recruiting Agency example - overview for consultant
Microsoft Great Plains does wonderful ERP job for horizontal markets and clientele. However in our opinion placement software market is underserved and needs custom modules to be developed.
The Importance of Value Mix
( * - the word 'product' can be substituted to mean 'service' too; and vice versa )Every consumer looks at maximizing value accrual while engaging in act of purchase of products* or services*. Marketing as a domain plays a very important role in influencing a purchase.
Six Key Areas For Evaluating A Strategic Alliance
Strategic alliances are increasing at a rapid rate. It is
good for business, good for the consumer.
Innovate Today for Great Leaps Forward Tomorrow
How often does your company make a quantum leap forward? My guess is that, on a scale from "frequently (10) - to - never (1)" the answer is much closer to "never" because few companies have a process to innovate or think creatively. Very few attempt to formally think through their business model, their relationships with staff, clients, and vendors, and their product / service offerings.