Every small business owner looks forward to the day his or her company takes off and has more demand than supply. You might need to pay for more inventory or marketing for gaining new customers, or in other cases, you may be ready to buy out the competition or merge with another firm. When that day arrives, it is smart to be prepared with a source of expansion financing – in other words, a way to pay for that quick growth. Here are three things to know to help you know when and how to secure expansion financing for your growing working capital needs.
1. Know When the Time is Right
Lenders will want to see that there is a demand for growth today rather than just a projected demand in the future. If you can show a lender orders you are unable to fill because of a capital shortage, you will be in a stronger position than if you are just hoping to have more orders than you can fill. Lenders will also want to see that you are handling your current business transactions well and that you are not seeking financing for a sinking ship. Any documents you can provide to show your business’s success will be helpful.
2. Know Your Borrowing Options
There are more lending options today than ever before for small business loans. Of course, there are banks and credit unions, but there are also online lenders as well as crowd-funding options to explore. Each lending avenue will offer different interest rates and terms, so be sure to do your due diligence before selecting an expansion funding platform.
3. Know Your Company’s Financial Status
Do you know your business credit profile? Your business and personal credit score are likely to be used to determine your credit worthiness. Lenders will also want to see documentation of your annual revenues, profit and loss statements and specific business needs that will be met by this expansion capital.
When the time comes to grow your small business, knowing a few key pieces of information can give you access to the expansion financing your need.