If you believe expanding your business could dramatically improve your bottom line but aren’t sure if it’s worth the cost and hassle, you are not alone. Consider the common reasons that businesses expand before making a final decision. Then, review your options to move forward and grow your enterprise.
Why Do Businesses Choose to Grow?
Once you start investing in facilities, marketing, and staffing, among other things, your expenses can surpass your income. A
quality working capital loan can get you through until your changes begin to fatten your bottom line. Here are the major reasons that businesses need to expand, requiring additional capital resources:
- Marketing. Investing in marketing is critical to fuel business growth.
- Inventory. More sales or orders means that you need deeper inventory reserves.
- Facilities. Whether you need warehouse or office space to house your operations, renting or purchasing new space requires a capital infusion.
- Adding locations. Whether you are opening your second or tenth location, you need to spend a lot of money before you see additional revenue pour in.
- Hiring. New staff allows you to extend hours and increase customer satisfaction.
- Equipment. Getting new or improved tools can increase efficiency and help operations run smoothly.
How much Working Capital is Needed for Business Growth?
To determine how much
working capital you need, you need to know your historical turnover rates. Look at your actual balance sheet and income statement to find out:
- Number of days of inventory on hand (inventory turnover)
- Number of days customers take to pay (accounts receivable turnover)
- Number of days you take to pay vendors (accounts payable turnover)
After you know your turnover rates, you can forecast how much
working capital you need for your planned growth, which requires higher inventory levels and accounts receivable outlay. For this, you need to put together a projected income statement that includes projected sales and the projected cost of goods sold.
The changes to working capital is the difference between your projected and actual inventory, accounts receivable, and accounts payable balances. This is the amount of working capital financing needed to achieve your expansion needs.
What are Your Options for Financing?
Many small business owners achieve their expansion plans through a
small business loan. Our options for debt-based financing are expansive because we understand the importance of obtaining working capital to free up your existing reserves and avoid a one-time hit to your bottom line. If you have good credit, you probably qualify for a traditional term loan. For amounts under $50,000, consider a microloan.
In cases where your expansion is driven by equipment purchasing, such as manufacturing equipment, computers or commercial appliances,
equipment financing is a great option.
Contact Us
MY Company Funding offers small business loans and equipment financing. Feel free to contact our team with any questions you may have on your specific situation. If your business needs to expand, we can provide quick funding for low or high financing.
