Many small business owners struggle with the decision to obtain additional funds to help their business or not. Indebtedness is perceived as an unacceptable risk to many entrepreneurs. However, there are certain situations when it makes sense to borrow money. Do you find yourself at any of these points in the lifecycle of your business?
Funding a New Business
If you have decided to finally test out that great idea for a business you have had for years, it is tempting to start out slowly and grow little by little. This may be a perfectly acceptable plan for a service or other type of business that relies on your skills and expertise.
If you are purchasing an existing business, however, or need equipment, office or store space or employees, the upfront capital investment will be much higher than for a simple service business. The drain on your personal resources may preclude you from being able to self-fund your start up. In this situation, your business success may rely on obtaining adequate funding for your business.
Funding to Manage Your Business Wisely
Whether your business has cyclical ups and down or not, there may be times in the life of your company where your cash flow runs short. For example, you may have accounts receivables that are taking longer than expected to turn or need to purchase more inventory to get better unit pricing.
Rather than draining your bank account in these situations, it could make more sense to obtain additional funding through a loan. Wisely using debt to get past these cyclical challenges may be the best cash management decision for your business.
Funding To Invest In Your Growth
If your business is as successful as you plan, it will be inevitable that you eventually consider growing to the next level. This can involve moving to a bigger or more attractive location, expanding into new markets or product lines, or increasing your marketing and advertising to increase sales. Any of these growth opportunities will require up-front cash to execute successfully.
Taking advantage of outside funding when things are going well and your business is growing should be an easy decision. Many small business owners, however, feel it is safer to fund growth from cash flow or retained earnings. This choice, however, can be riskier than financing because it will result in a drain to the company’s resources.
Financing Can Help!
The bottom line is that taking advantage of outside funding opportunities can be a wise and prudent decision for your small business in many situations. Whether you need an extra jump out of the gate to start ahead, a little help managing the normal cycles of business or want to grow to the next level, you should consider outside financing.
If you find yourself in any of the situations described here, outside funding could be just the solution you need. There are many creative and alternative lending solutions catering specifically to small businesses and their unique needs. These include working capital loans, invoice factoring loans, equipment leasing and financing and many more.
Do your homework and determine exactly what you would use the funding for, and that the benefits are worth the risk. At that point, meet with a small business funding advisor at Advance Funds Network who can help you find the best funding solution for you and your business.