Any business owner is bound to think of the growth of his company. But to grow, you first need to invest in growth! Whether you want to increase sales, introduce a new product, launch your services in another city or country, or venture into a different line of business, you will have to spend a substantial amount of money.
And since it will take a while for your investment to yield profits, you need to make sure that you’re not short on cash. If you have no idea as to where you’ll get all the dough from to finance your business expansion, you have no reason to be worried. Here are some sources to consider.
Think Personal
Investing your personal savings to fund your business expansion plan can be the best thing you could do. That’s because you have easy access to your savings. What’s more, since you’re your own boss, you won’t have to worry about repaying the amount you borrowed! You also won’t have to waste time looking for funds elsewhere if you have all it takes to expand your business.
Additionally, you can consider withdrawing money from your Individual Retirement Account (IRA). You won’t have to pay any extra charges or interest if you replace the amount withdrawn within 60 days. If you miss the deadline, you’ll be charged taxes and a penalty.
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Do note that it wouldn’t be wise to invest everything you possess. Assess the risks carefully before you tap your savings.
Channel Your Current Profits
As you already have an up and running business, you could use the profits generated to expand your business. Retained earnings can earn you an interest when you let the amount sit in your bank account. However, you’ll earn a greater profit when you channel the funds toward expanding your business.
Just ensure that you aren’t depriving your present business of the funds it needs to function well! You don’t want to concentrate completely on the business expansion project and neglect what you already have.
Swipe Your Credit Card
You can use your credit card for small amounts or emergencies. Make sure that you repay the amount on time. Falling behind on your payments can affect your credit score. Moreover, paying only the bare minimum each month can become a continuous habit. Remember, using a credit card can get you out of a jam, but only when you use it wisely!
Borrow from a Lender
You can consider asking your friends and close family members for a loan. Ensure that you have a business plan in place before you ask them for help. That’s because when you ask them for money, they will want to know when they can expect to see it again.
If things are going to be risky, let them know upfront instead of making false promises. You don’t want to jeopardize your personal relationships with your loved ones. Moreover, if your plan fails and you aren’t able to pay them back, you could be putting them into serious financial trouble!
If you don’t want to bring family and friends into this, consider getting a loan from a bank or other financial institution. Depending on the financial institution and your needs, you could get a line-of-credit loan, an installment loan, an interim loan, a balloon loan, etc.
Many business owners also take a home equity loan secured by their personal residence. You could also enjoy a lower rate of interest on a loan by offering your car as collateral. However, this would expose you to a significant risk so go this way only if you’re sure that you’ll be profiting from the business expansion.
If you can’t obtain a loan from a bank or any other financial institution and if your business meets certain qualifications, you could always apply for an SBA loan.
Find Investors
If the risk of losing your house and loved ones is too much to handle, turn to investors. By collaborating with experienced investors, you’ll get the funds you need plus expert advice on several things related to your business plan.
You could consider approaching angel investors. These are essentially people who are willing to invest their money where they can get better returns. An angel investor may ask for a partial ownership in your business in exchange for the investment he makes, or he may be content with you repaying the debt. Be sure to clarify these things beforehand.
Note that it isn’t easy to get an angel investor to invest in your business. You’ll need to meet angel investors fully prepared with your competitive analysis, market assessments, and sales plans.
Another way to find investors is by turning to crowdfunding websites. Crowdfunding is fun and it can be an effective way to generate funds for your business expansion plan! All you need to do is work on your pitch and post it on the crowdfunding platform.
Make sure that your idea is easily understood by others; after all, people need to know what you intend to do if you expect them to fund your project.
Conclusion
Now that you know you have ample options to choose from, you don’t have to spend sleepless nights wishing you had the cash to expand your business. With the information provided here, you’ll be able to decide what’s best easily. You are sure to find that financing a business expansion plan is relatively easier than financing a startup!
Author: Shayna Smith is a real estate investor with over 5 years of experience as an independent trader. She works with financial institutions such as Newcastle Permanent, and offers general advice to newbies on making better investments in finance, banking or real estate sectors.
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