3 Types Of Loans For Expanding Your Small Business
One problem that you as a small business owner can have is figuring out a way to finance the expansion of your business. Granted, this is a good problem to have, but it can be a difficult one to solve. You have worked hard and are now at the point where your business is growing fast. In fact, it is growing fast enough that you can no longer fund the expansion with your present sales. The following are three options to consider to get the financing you need for continued growth and expansion.
Borrow against your accounts receivable.
If your company has been growing quickly, you are likely to have a cash flow problem. However, your books will look quite healthy, especially your accounts receivable. Lenders who specialize in business loans can appreciate the value of a company's accounts receivable and will loan money against a certain percentage of the money on your books. In effect, you will be getting an advance on collecting the money owed to you, and this money can be used to buy more raw material, supplies, or inventory, or perhaps expand your payroll.
Borrow against your future credit card sales
This type of funding for your business is applicable mostly to a retail establishment. There are lenders who will lend money based upon the amount of sales done with credit cards. In general, the way it works is that the lender will take a percentage of your future credit card sales as payment for the money they lend you today. If your sales are growing, then you will be funding your expansion with future revenue. As long as your retail business is growing, this can be a good option.
Get a business loan
Although a business loan is obvious, you should understand that a lender will want security for the loan. If your small business has been successful and you are truly ready to expand your operation, you should have built up some equity in your company. You can use this equity as collateral for the loan you need to expand your business. It is important to seek this type of loan from a lender with experience in business loans. They will know how to evaluate the worth of your business, and are likely to understand your business plan for expansion.
A growing business can be exciting, but it offers challenges to a small business owner because growth and expansion must be paid for. The three ideas listed above are a good starting point when deciding the best option to finance the expansion of your small business.