Growing your small business increases your visibility, draws more customers, and improves your bottom line. There are advantages to growing your small business, but how do you know if it is the right time?
Do you have a business plan with clearly articulated and measurable goals? Have you established business credit? How will you finance your business growth? Where do you stand with outstanding debt, such as unsecured loans?
Read on to uncover valuable answers about financing business growth.
Expanding a business means more sales, greater brand awareness, more customers, and increased revenue. However, before expanding, you need to make sure that the timing is right. Here are some things to consider.
- You Have A Reliable Customer Base – If you have a steadily growing consumer base with repeat business, you know your product or service is in demand. It might be the right time to expand your offerings or locations.
- Your Industry Is Robust – If your industry is growing, then it might be a good time to grow your business too. You have a ready-made environment in which to prosper.
- You Want To Increase Your Profit Margin – The larger your company, the more opportunities for lowering operating costs. If supply chains offer better terms, you can purchase equipment and supplies in bulk to improve cash flow.
Your goals define the purpose of your small business. They give you focus and a way to measure progress. Goals are not your mission. Goals are action steps that keep you on the path to fulfill your mission. You need short-term and long-term goals, and all the while must continually measure and redefine your goals as your business grows.
Goals are important for your employees too, as they build motivation and help them prioritize tasks.
Your goals form the building blocks of your strategy and are a major component of your business plan. Lenders and investors will ask to see your business plan and they will particularly focus on your vision, goals and objectives, business model, and financials.
Your business plan guides you when making major spending decisions such as increasing staff or purchasing new equipment to grow your business.
When lenders, investors, and credit card companies consider your application for funding, they look at your estimated annual sales, projected revenues, and your business credit.
Your business credit is based on how you have handled credit transactions that have been extended to your small business.
- This includes unsecured loans, lines of credit, credit cards, and other transactions.
- If you have taken out small business loans online to finance your business objectives, they also become the building blocks of your business credit.
Good business credit positions you to secure the most favorable financing terms when you seek funding. Accordingly, you also may avoid the need to prepay for services or products.
- This frees up your cash flow.
- More liquidity empowers you to finance your business growth.
Even if you have no debt, but you are a new business with no business credit, you might be turned down for financing.
- Establish That You Have Business Credit – Contact the three credit reporting agencies and ask for your credit report. If they are unable to locate a report for your small business, this means you have not opened accounts with vendors, suppliers, or agencies that report to the major bureaus.
- Check Your Credit Report – Obtain a copy of your credit report and carefully examine all the information. There can be errors in your business credit report. For instance, you may have closed a credit card account, or paid off an unsecured loan months ago, but it shows as open on your business credit report. Be sure that all the identifying information is correct.
- Check-In With Vendors To Ascertain If They Report To Credit Bureaus – Vendors are not required to report to the credit bureaus. This means that you could have a perfect record with your vendors, but this will not build credit for your small business. Try to work with vendors that report to the credit report agencies.
- Pay Your Balances In Full – You should always pay your small business loans and credit card balances in full before the due date. The longer it takes to repay, the more interest you incur.
Depending upon certain factors, now might be an excellent time to finance your business’s growth. If you have a business plan with clearly defined goals and objectives, established good business credit, and the environment is favorable, it could be an excellent time to consider financing growth.
Ultimately, accessing small business loans online, opening business credit cards, or taking out other kinds of financing require a credit history. Therefore, building business credit should be a top priority before financing business growth.