If you started a new business last year, you might find yourself in the position to expand. However, knowing how to raise the cash and pay for the move can seem like a minefield.
The last thing you want to do is make the wrong decision and ruin your efforts. You’ve probably worked very hard during the past 12 months, and you don’t want to mess it up now. Even so, your company could decay without a cash injection for growth.
So, you’re looking online to see if you can find some expert advice. Well, luckily, that’s what you’re getting from us today. We’re going to go through all your options in the hope of highlighting something suitable.
Just remember that final decisions are down to you!
#1 Use Your Profits
In some instances, you might have enough cash in your business to pay for the expansion. If that’s the case, you shouldn’t bother trying to borrow any money.
Take a leap of faith and invest your profits back into your company. At the end of the day, you won’t have to convince anyone of anything, and you won’t pay any interest. So, it is by far the best option in front of you today.
Maybe you only have half the money you need in your accounts? Well, you should still use that before raising the rest. Like it or not, lenders will charge exorbitant rates of interest if you don’t have a good credit score or track record. For new company bosses, that means they always end up paying over the odds.
#2 Go to the Bank
Contrary to popular belief, most banks are more than willing to loan money to business owners these days.
You just need to arrange an appointment to see the manager and explain your situation. Taking as many printed documents along as possible is sensible. You could even get your original business plan if you think it might help.
The bank just wants to understand your ideas and find evidence that you will meet the repayment schedule. As we said only a moment ago, you will always pay more interest if you’re taking out a loan for the first time.
However, those rates should decrease as you build a good credit rating with the lender. Indeed, established and trustworthy firms can pay as much as 50% less over the course of their loan than others.
#3 Consider an Invoice Financing Loan
Now we’re getting to the interesting stuff. Most people don’t know this type of loan exists, and so we wanted to discuss it on this page.
Many business owners are owed a lot of money through yet unpaid invoices. There are some specialist firms out there willing to lend cash based on that debt. Financing those invoices before they’re paid is an excellent way to raise some extra funds.
The money is yours regardless – you just need to collect. In most circumstances, interest rates on loans of that nature are small. That is because the lender has seen the invoices, and they know you will make the repayments.
You just need to be 100% confident that your clients will cover their invoices sometime soon. You can then pay the money back to your chosen lender.
#4 Sell Part of Your Operation
There are many advantages to selling part of your company to an investor. Firstly, you get the cash you require without having to pay anything back.
Secondly, you get an extra pair of hands and some vital business expertise from someone new. When all’s said and done, they will spend thousands to purchase a percentage of your firm. So, it’s in their interests to make sure the company succeeds.
Otherwise, they’ll lose their money and end up with nothing. There are specialist websites you can use to advertise opportunities of that nature, and most of them are free to join.
So, maybe you should get the money for expansion by parting with a small section of your business? Just don’t let go of more than 40% because you want to retain control.
#5 Try Peer to Peer Solutions
Many people reading this post will know about the benefits of peer to peer financing. It’s a concept that enables businesses to get funding from anyone who uses the websites.
From the investor’s point of view, it’s a secure way to make a profit from their savings. For you, it’s a straightforward and fast method of getting the cash you require.
You have to agree to the repayment plan and interest rates upfront. However, after taking a quick look at some of those sites online, it appears there are some excellent deals available. In most circumstances, the rates you pay are much less than you might expect.
Indeed, they put most high-street banks to shame. Take some time to browse domains of that nature and see for yourself.
#6 Merge with Another Company
If your business makes a decent profit, you might convince other business owners to consider a merger. Perhaps you could expand into one of their facilities for a small fee?
They take a small percentage of your profits, but you work together. Obviously, that’s never going to work if you approach a competitor. However, we see more company bosses from different industries working together every single day.
Let’s presume you sell parts for racing bicycles. You could get in touch with brands that sell water bottles and other sports goods. There’s no conflict of interest because they don’t stock the mechanical parts in which you specialize.
Even so, you could both make a fortune by pooling your customer and client bases.
Now you know about some of the best ways to pay for your expansion, getting the money you need should become easier. When all’s said and done, you always need to read the small print and check everything before adding your signature.
Indeed, we think you should seek legal advice before accepting any form of lending for your company. The last thing you want to do is get it wrong and leave yourself unable to pay the bills.
Are you looking at doing a business expansion? Share your story in the comments below.