Financing a business expansion - large office with man sat at desk and plants.

Financing a business expansion can be exciting.

When your business is running well and becoming a success, it’s likely that you’ll have plans for growth and expansion.

However, this can cost money, so you need to think carefully about how you’ll finance this. Otherwise, plans can backfire, you may lose money, and go into monetary instability. So, I’ll be going through the four main steps involved in successfully financing a business expansion.


Ensure You Are Making the Right Decision

There are numerous reasons why you could be looking at financing a business expansion. Let’s say that you feel like you have outgrown your current premises and you want to move to new offices. However, just because you have enjoyed success at your initial location, it doesn’t mean that you will necessarily transfer your achievements to your new business premises straight away.

You should aim to evaluate your expansion plans objectively, getting an impartial viewpoint on the pros and cons of your decision. You also need to ensure that your business is financially stable enough to be able to deal with the level of upheaval.


Forecast Costings

Now comes the stage when you need to forecast the costs involved in your business expansion. Some of the estimates that you may need to acquire include leasing space, hiring new members of staff, and acquiring additional stock and inventory items.

Remember, you are already in an advantageous position. You would have done this when you were launching your company initially. Make sure that you account for any hidden costs by overestimating the budget that you will need. Once you have forecast the costs properly, you will be in a much better position to show a potential lender how their investment will pay off.


Shore Up Your Personal Credit

Ensure that your personal credit situation is in good shape by consistently making payments on time both in your everyday and business lives. If you plan on financing your expansion through minority business loans or a similar method, you need to take extra care that your credit reports look strong.

If there are any errors that you find, you need to sort them out. This might be time consuming, but is necessary.


Choose Your Best Financing Sources

You have a range of financing options in front of you, and they tend to fall into three main categories. The first is working with investors. Perhaps you will look into venture capital funding or working with angel investors. The advantage of this method is that the investors are bringing their experience on board with your organisation.

The second option is crowdfunding. This gives your customers the chance to work closely with your company. Finally, you have debt-based fundraising such as applying for a business loan.

Make sure that you do plenty of research and choose the financial plan which is best for you and your business.

4 Steps to Financing a Business Expansion

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