Working capital is the key to growing your business. It’s the fuel that allows you to expand into a new market, launch a new product or service, purchase equipment, hire more staff, and enlarge your facility. A business loan or line of credit can provide the necessary expansion financing to reach those goals.
Before you approach a lender to finance expansion, prepare by following these three strategies.
1. Fine-tune Your Plan
Securing expansion financing makes sense when the expansion cost will be less than the profits made from the expansion. To increase that probability, fine-tune your expansion plan before presenting it to your lender. Study your past sales, research your market, and look at your competitors to make sure your expansion plan is logical. Think about the obstacles and costs. Does data show that the expansion will likely allow you to fill more orders or accommodate more customers? Or does data indicate that the expansion will increase expenses and workload with little chance of increasing revenue? Making these discoveries will allow you to adjust your expansion timeline and strategy.
2. Understand Expansion Costs
A practical analysis will help you understand the price tag of your expansion. For example, if your expansion plan is for a new building, determine your facility, staff, and inventory expenses based on your experience with your first location. Also, research the performance of similar-sized competitors in comparable markets. A new location, new service line, or other expansion may not become a revenue driver right away; set a realistic timeline for how long it will take this investment to break even and ultimately become profitable.
3. Watch Your Credit
Securing the financing you need at the best possible terms requires a good credit rating. For many small-business owners, especially Sub S and sole proprietors, your individual credit rating is just as important as your business’s credit rating. Staying current on all your accounts is essential. As you prepare to finance your business expansion, request and review your credit reports. If there are any errors in these reports, contact the credit rating agency immediately.
Your best financing option will depend on your business’s size, scope of your expansion, and capital needs. Lending options include:
- Term Loan: Ideal for a one-time expense, such as renovating or expanding your facility. - Equipment Financing: Designed for big-ticket equipment purchases, such as for construction, manufacturing, or IT. - Business Line of Credit: A useful solution for other short-term cash flow needs.
The information contained herein is for general informational purposes only and does not constitute tax, legal, or business advice.
Brought to you by Nu Direction Lending, a digital-first business lender that was formed and is funded by credit unions. To learn more about loan and credit solutions, visit nudirectionlending.com or contact us by email at firstname.lastname@example.org or by phone at 866-354-7151.
Nu Direction Lending is a digital-first business lender that was formed and is funded by credit unions. We combine the speed and convenience of online lenders with the personalized touch of the local credit unions who help fuel our local economies.