Growing a business isn’t quite as easy as serving a few extra customers. Revenue always seems to find a way to go towards working capital, leaving no extra funding for expansion. Sometimes the best way to ensure business growth is to bring on a little debt and get a quick rush of cash that can go exclusively towards upsizing your company. While long-term debt is usually bad for business, the right loan with the right terms can put your company in a position to increase earnings and repay the borrowed money without trouble.
There’s an abundance of lending options that entrepreneurs have to choose from. The Small Business Administration alone coordinates billions of dollars in funds lent to small companies looking to grow. While many business owners opt for equity lending in hopes of avoiding debt all together, taking on a loan allows you to continue operating as the sole decision maker. You’ll be responsible for reimbursing the lender but also in full control of the company and the profits.
The most important thing to consider with debt financing is the timetable for your business growth. If the expansion will happen over the course of years, you’ll need to make sure the loan doesn’t require unmanageable monthly payments. The terms will depend on how much money you’re borrowing, who you’re borrowing from and what the money will be used for. Many small business lenders work within specific industries and can offer good rates to the right company. Having a solid proposal can be the difference between getting a quality loan and not getting approved at all, so make sure you’re ready to pitch before asking for a bunch of money.
Some business owners assume they won’t be able to access debt financing because of bad credit or any number of other things that lenders might take issue with. Fortunately, small business loans can be more forgiving than standard lending practices. If your plan for funding business growth seems sound, the lender can look towards future earnings as a possible guarantee and feel more confident extending the capital. In some ways, the expected growth can be leveraged to get the money needed to create said growth.
If you’re going to finance your business through some sort of lending practice, debt financing is an option worth considering. The increased revenue from your company’s expansion can make paying back a loan an easy endeavor, and after that you might never go in to debt again.
- Financing Blog (22)
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