Obtaining financing for business expansion can be quite daunting, especially for those who have not owned a business in the past. If you are a first-time business owner or have not sought business financing for growth in the past, you might be intimidated by the thought of asking for financial assistance. There is nothing to fear. Financing for business is nowhere near as complicated or risky as some make it out to be. Without further adieu, here is an explanation of financing for business expansion broken down into three easy steps.
Step 1: Do Your Homework on Potential Investors and Lenders
If you own a somewhat successful business, you will likely have several financing options available to help your business reach its true potential. The question is which one of these financing options is best for your unique company. Perhaps your business will be best served by one or several loans. It is possible to obtain a small business loan from lenders such as Amerifi.
Alternatively, there are also venture capitalists willing to invest in growing businesses. Consider the scope of your company’s unique expansion plans when determining which financing option is ideal. Between angel investors, venture capitalists, lenders and others, you will likely have plenty of options.
Step 2: Know Your Numbers and Prepare a Plan
Consider the numbers side of financing before requesting financial assistance or making a commitment to a financier. Determine how much debt you can take on or the percentage of ownership/revenue you are willing to surrender to a venture capitalist or other investor for funding. Though it will take time to organize all the numbers and run calculations for potential investment or lending scenarios, these projections must be run.
Determine what level of debt is sensible for your business, whether it makes sense to take out a loan at a certain interest rate and what type of return the investment will provide. Even if the numbers are not your primary concern at the moment, knowledge of your company’s most important financial information will help establish a rapport with potential lenders and investors. Make a highly-detailed pitch to investors featuring specific financial figures and it will prove easier to generate interest from potential investors.
Step 3: Carefully Review Loan and Investment Offers
Lay out all of the financing options, review them with your company leaders and select the one that makes the most sense for your business. Between loans with varying terms and interest rates, venture capitalists and other investment groups, you will likely have multiple options available for financing the growth of your business. Do not move forward until you perform a cost-benefit analysis of each financing option.
Take Your Time When Reviewing Financing Options
The business expansion financing option you select has the potential to alter the direction and future of your company. Do not take this decision lightly. Perform your due diligence, weigh the merits of each option and you will make a sound decision that takes your business to the next level.
About the Author:
Marla DiCarlo is an accomplished business consultant with more than 28 years of professional accounting experience. As co-owner and CEO of Raincatcher, she helps business owners learn how to sell a business so they can get paid the maximum value for their company.