Small businesses grow. They expand to include other products or they simply grow into a larger, more profitable entity. Either way, at some point, having another round of financing may be needed, if you want to jump start the process and move ahead without any delays. It’s important to know exactly what you need. Having a solid plan in place is a must and will guide you through the process of finding working capital.
Know What You Need
When you create a plan for your future upgrade, you will include several details that will allow you to determine how much working capital you will need. You will need to borrow the right amount the first time. This ensures you have what you need to grow as well as a little extra to maintain that growth if any growing pains or obstacles arise. Borrowing a little extra will give you what you need to make a few of the payments without stressing or curbing your new growth.
Monitor Your Credit
Monitor your business credit. This will give you a hint as to when you should start looking into a little extra funding. It will also help you determine which type of lender may be more suited for your business. If your credit scores aren’t where they should be, try to improve them. You will get a better rate and may qualify for additional funding. If you have a revolving line of credit, try to keep it as low as possible. Under 30% of your total credit line is best.
What Type of Financing Is Best?
When it comes to the type of funding you choose, there are a few options. A traditional term loan is a good idea for a one-time purchase like a new roof or new equipment. You get all the money upfront and pay it back over the course of time. Revolving credit is more flexible and remains available for as long as you need it. A business credit card is a type of revolving credit. A revolving line of credit is similar to a credit card but works like a loan. The more money you pay back, the more you have left to borrow if you need it. As long as you keep the account open, you will have access to the additional funding.
Possible Loan Qualifications
Many loans have qualifications that must be met. Common qualifications include how long you have been in business, your credit scores, and your yearly income. Some lenders may look closely at your industry as well. Know what your lender looks for and have as much information as possible in hand before you apply. This will make it easier for both of you. Having a new round of financing can be beneficial if you are ready to improve your business. It’s good to have the money on hand when you need it than to try and apply for a line of credit if you hit a snag. Be financially prepared by applying for working capital before you actually need it. The process will be much smoother and you won’t have to worry about delays or slowdowns.