How Can I Expand My Business?

21 November, 2012

Is your business doing well? That’s great if it is! And if it’s developing successful then there is a good chance that expansion will mean even more success! Once you’ve figured out that formula for producing profits there’s a good chance that increasing the size and possibly scope of your business will generate more revenue and higher profit margins.

Expansion isn’t cheap, however, and almost always requires major capital investments. Thankfully there are numerous options for finding the funding necessary to expand your business. Some of the more popular options include private loans, loans from friends and family, seeking out investors, and obtaining grants from the government.

Securing Government Money

Just about every business owner would prefer to obtain their funding for free or with no strings attached. In some cases the government will offer grants without stipulating repayment, and sometimes angel investors will give out money without requiring a stake in your company. Most of the time, however, you will have to either repay a loan with interest or sell a stake of your company to an investor.

Finding Investors for Your Business

You can set up your company as a free-standing entity and then sell stocks or shares to investors. These shares can be sold on a stock exchange or through other deals. Oftentimes venture capital firms will require a stake in your company (usually between 8 to 15%). Selling stocks and ownership, however, decreases your control of the company and in the long run a portion of the profits and proceeds from the business. On the other hand your investors will have to shoulder some of the risk with you.

Taking Out a Loan

Another popular option is to obtain a loan. Loans usually come from your own personal network of friends and family, the government, or a bank. Some other organizations, such as not-for-profits, will also provide loans and funding to businesses in exceptional circumstances. Small business loans in Australia will provide you with the necessary capital to expand your business and thus your profits!

Loans are not free money, however, and usually require repayment. Loans almost always charge money though there are exceptions. Sometimes the government, for example, will provide interest free loans to disadvantaged communities or to spur the economic development of key industries, such as biotechnology. Your business will have to meet the stipulated criteria in order to receive the loan.

Banks are probably the most common source for a loan. For starting up business loans, a good credit history, business financial plan and sometimes collateral are required as you do not have any evidence of company financial history yet. In order to obtain a loan you will have to show the bank your company’s financial history, its expansion plans, projected revenue and profit increases, and anything else that will convince them that you will succeed. The bank will then loan out money and charge you annual interest, usually in excess of 10 percent and often as high as 19 percent or more. Interest rates are generally higher then consumer level loans because there is a greater risk of your business failing and thus being unable to pay back the loan.

Some people also turn to their personal network for loans, but be careful! Financial relationships are often very stressful on personal relationships!

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