How to Make Financial Space for Expanding Your Business
If you’re looking at a business expansion in the next year or so, you need to plan ahead now to make sure you have the financial space to be able to accommodate the growth. Depending on what kind of expansion you are looking at, this might mean a variety of things. If you are expanding your current facilities, will your construction impact your productivity? If so, how does that impact your cash flow during the expansion? On the other hand, if you are opening a new location, do you have the reserves and financing to cover all the startup costs of what is essentially a new business in a new location?
Answering these questions is integral for any company looking to grow. That means making a financial plan that will lead to the expansion’s costs being covered without disrupting your ongoing business or causing cash flow management problems. The first step in that process is budgeting for your regular operating expenses and seeing how much of your total monthly income is taken up by them. This will show you how much income is available to use to cover the expense.
Usually, your monthly income and cash reserves alone won’t cover a business expansion unless it is very modest. That’s where financing comes in. By using financing to get loans or other credit products that will cover the costs of expansion, you can easily gain access to the equipment and facilities you need while keeping your monthly additional costs within your budget for expansion. Using some of your company’s reserves can offset these costs with down payments on buildings or equipment, but there are also zero down financing options for equipment acquisitions and other financing options.
Finding the right way to manage your expansion means working with a lending partner who understands how multiple specialized credit options can fit your business cycle better, allowing you to get more out of your expansion while staying within your budget and keeping your current projects on track. That means finding a lending partner with experience shepherding companies through business expansion. Those lenders will be better prepared to provide you with the guidance and recommendations that will fit your needs. Keep in mind that this kind of financing typically involves cash flow management tools like factoring alongside equipment financing, and even sometimes new commercial real estate loans.
There’s no one-size fits all option, so there’s no one-size fits all lender. It will take time and research to find the partner whose fees and funding options work for your company.