When Business Growth Leads to Needing a Small Business Loan
You work so hard for so long and suddenly your business starts to grow. It’s exciting! It’s exhilarating to find people who believe in your idea.
And then it happens.
That moment when you realize some of the challenges that come with growing and scaling your business.
The challenge is clear. Hard work and cost-cutting only goes so far.
For many small businesses there comes a time where there is a need for outside financing.
It’s time to get real and find a way to invest in your business to support its continued growth.
How do you know it’s time to look for outside financing? Here are four scenarios when you want to consider a small business loan.
- You need more physical space.
Have you reached the point where your team is sitting on top of each other? One company had their team sitting at desks in the hallway, they were bursting at the seams and were walking the fine line of fire safety regulations with their office configuration. Another company sold baked goods and their kitchen space was already stretched to the max when they received a large ongoing order.
There are many examples of small businesses facing the challenges that come with growth, but ultimately they all lead to the same place – do you stay the same size at your maximum capacity, or do you make the decision to expand into a larger space and scale your business?
If you decide to grow, there are options like small business loans, or term-loans that can help you take your business to the next level.
- Let’s talk limited inventory
You have a great product and it’s selling regularly, but you need to purchase more. Are you starting to lose orders (and revenue) because you don’t have the inventory in stock? How are you ensuring you can replenish your stock once it’s sold?
Whether you have products that are seasonal, or you have to order in large quantities, when it comes down to it, you need to be able to purchase more in order to sell higher quantities.
Review your sales projects and determine if it makes sense to look into a bridge loan or term-loan option to hold you over until you sell the extra inventory.
- New Talent and Skill Sets
Are you a services industry pushed to your limits with your current staff? Frequently, we see this combined with clients that have a longer payment term (or that are slow to pay). When you look at the investment of your team and where the demands for talent are, the ultimate question is, how much financial value will the new employees add to the bottom line? Does the value of the potential talent outweigh the cost of the loan?
- Equipment, tools, and technology
Every business has equipment, tools, or technology required to make it work. Many small businesses rely heavily on their equipment in order to run their business. What machinery, tools, or technology is required for your business and what impact will it have on the bottom line? Consider the critical nature of the equipment and its impact on revenue. For some equipment, there are loans that use the equipment itself as collateral.
The key is to make sure the equipment or technology is central to the business and it’s growth. High-end espresso machines might keep your hipster employees happy, but unless you’re running a hipster cafe, it’s likely not central to your business and revenue.
The Bottom Line
Ultimately, it comes down to deciding if the additional debt is worth the potential growth. Understanding your sales projections, debt ratios, and profits are critical to your decision to invest in future growth. In other words, is the potential upside and growth worth the short-term risk?
That’s something only you can decide.
If you have questions, you can also learn about creative financing options and types of small business financing available.
And if you want a real person to answer your questions, contact us today!
