There are many reasons business owners decide to expand their companies, but most of them boil down to the fact that there is not enough. You may not have enough space, employees or inventory for the number of customers coming through your doors. Each reason to grow your company requires working capital, which for most owners will mean applying for some business financing such as a loan or line of credit. Using this funding correctly will allow you to reach your growth goals without leaving you to scramble to make monthly loan payments.
Buying Real Estate
Commercial real estate is an excellent investment for companies looking to expand now or in the future. You can take advantage of the SBA’s loan programs to purchase property as long as your business will occupy at least fifty-one percent of it. This plan leaves the other forty-nine percent available to rent and brings your company some passive income. Even if you decide not to go with the SBA’s programs, buying real estate is cheaper in the long run than renting it, and commercial property tends to appreciate over time, giving you more funds to work with when you decide to sell.
It is not usually recommended to use business financing for ongoing expenses, like hiring staff. If your projections show that more workers can bring in more profits, then a temporary infusion of cash into your working capital is worth it. Your cash flow is likely to take a hit during this process’s hiring and training phases, which can pick up once the new hire learns the ropes. For example, if your retail store often has long lines at the registers, you will likely see customers leaving without purchases. Hiring additional employees will cost their wages from the first hour of work, but they will need to learn how to work the point of sale system and the answers to common customer questions before easing the congestion in the store.
One of the most innovative ways to use your business loans or lines of credit is by ordering more supplies before a projected boom or for a large project. Securing supplies in this manner is investing in future sales and can save you from having to turn away large orders. It is important to remember storage space for these supplies and not order more than you can feasibly hold.
There are many ways to use business financing, but the three main ways to use it for growth goals are purchasing real estate, hiring more workers and buying supplies. It is crucial to factor in your growth goals and working capital to not overextend yourself.