The Ins & Outs of Financing a Business Expansion
- and able to convince them that lending money to you and your business makes good business sense to you and to them.
- Make sure your expansion is the best way to move forward. One question you need to ask is how your business operates when you’re not around. If your presence is essential to the success of your business be prudent about expanding. You can only be in one place at a time. Then, determine whether an expansion is the best way to utilize your resources or whether making less dramatic changes in the existing business model would be a better use of capital and possibly more profitable with less risk.
- Next you need to determine how much capital it will take to expand. To do this you’ll need to project the costs associated with the business or building expansion plus the ongoing costs of the expanded operations. Completing a breakeven analysis will help you identify how much business you will need before the expansion becomes profitable and eventually pays for itself. Creating projections allows you to monitor your progress and make informed adjustments in a timely manner. Another important benefit of well-thought out projections is that if you’ve accurately projected reduced revenue, increased costs or an actual operating loss for certain periods you know you don’t need to panic when it happens.
- Now is a very good time to clean up your financial records. Most importantly, you need good information in order to make the most informed decision about expansion. Plus, with accurate and complete financial information you’ll be better prepared to show an investor or bank how you plan to repay their contribution.
- As a business owner you should always be working to keep your credit ratings in top shape. Do some due diligence on yourself and your company prior to seeking investor or lender financing. Make certain the information reflected in your personal credit bureau, and any business information such as Dunn & Bradstreet reports, is accurate and complete. You don’t want to waste time trying to recover from inaccurate negative information.