3 ways to acquire capital for expansion or improvements
There is never enough money to do everything you want to do with your small business. Expansion, product creation, moving locations and many other projects all require funding to accomplish, but it is the rare small businesses that can financially cover all their needs and wants.
Although it would be nice to own a company like that, most business owners strike out on their own for the challenge of creating a company that fills a need in the market. Although these owners may have good ideas and a great work ethic that won’t let them stop, most of them do not have the resources to plunge ahead with every project that piques their interest.
Prioritizing your needs
Running a successful small business is all about prioritizing the needs of the business. Building stock may come before expansion or product creation may have a higher priority than moving to a new location. As the business becomes more successful the priorities will change, of course, and the projects that were put on the back burner can gain a greater focus.
All those projects have one common ingredient. They all require funding.
Jumping into debt
When it comes to business, having manageable debt is not a terrible thing. If your credit rating allows you to buy on terms, do so. It allows you to purchase raw materials, make products and sell them before you must pay for them. The trick is to sell enough products to cover the cost of manufacturing and put aside some profit.
This works for the normal day-to-day business of selling a product or a service, but when the time for your projects comes, the money must come from somewhere and borrowing it may be the difference between a successful business and another failure.
Getting the money
In the current economy, traditional borrowing is more difficult than it has been. Especially for new or less-than-profitable businesses. The traditional ways to borrow money include:
– Collateral-based Loans. The most common type of business loan, this simply means that you put up the collateral to cover your loan amount. Whether it is business assets – such as stock, materials and real property – or it is personal assets like your home or your car, the loan is secured with the collateral.
– Information-based Loans. These loans are secured through your business credit score and financial statements. If you can prove you have a viable way to pay back a loan and your business has a good enough credit score to qualify, you can get money to expand or create new products.
– Viability-based Loans. Although not as common as the other forms of loans, viability-based loans can raise significant amounts of money quickly. Venture capitalists are the traditional source of viability-based loans, but the rapid adoption of crowdfunding has created an alternate method to raise money based on innovative ideas.
Additionally, these distinct kinds of loans can be combined to create multiple cash streams for larger projects. No matter which business loan financing platform you choose, a viable business plan will need to be created and, for new businesses, your personal credit rating will play into the availability of financial options.
Overcoming the funding obstacle for new businesses can be difficult and frustrating for budding entrepreneurs. The expansion of the global economy makes it easier to find funding sources. Overseas companies with an interest in American businesses can help you finance your startup, giving you more options when it comes to realizing your dreams.