A Business Owner Researches Financial Options to Expand

by Jill Foster on January 5, 2010

Learning to grow garden

How do you expand revenue by $12k each month?
Sometimes the most frustrating thing about being an entrepreneur is knowing exactly how much cash you need to have to expand. One would think that’s manna from heaven, knowing that if you were bringing in $4,000 more a month, you could expand your business enough to generate $12,000 more every month. The trouble is, where to get that cash from, especially if you have slow paying clients on the books or a lag time between when you make money and when you can actually spend it.

Image Learning to Grow Garden by Bob Franklin, Creative Commons.

Facing a nebulous factor
I’m sure you’ve been in the position at some point of explaining to a friend or family member that while being a small business owner may give you more freedom than they have, it also brings more stress. As happy as I am to be independent, one thing I do miss [from my salaried days] is knowing exactly how much money I’ll have on Friday. That’s so different than now and the nebulous factor of sales minus referral fees, advertising costs, and whatever is left of fees for services provided after the cost of labor/resources.

Yes it’s more money but it sure is a lot more complex.
Thankfully, there are things we can do to get more cash in a hurry. The traditional option, of course, is to check with your lender.

I started my company with cash and have never taken out a loan from any financial institution, ever. I hate credit cards and have only been to the bank in person twice since I started my business account.

And that makes me kind of like any newbie entrepreneur. I wouldn’t know the first thing about getting money for my business from a bank. So I did some research and asked around. Here’s what I found out.

One option: ask your current bank
While it’s true that, due to recent economic issues, banks aren’t exactly in a lending frenzy, there are several options available for borrowing money for your business. First, if you’re already doing business with a bank, it can’t hurt to ask them first. Especially if you have a way to secure the loan, they may not be as close-fisted as you may think.

4 factors that influence your business loan approval
Some of the things they’ll be looking at may even tip the scales in your favor. The following are items that can greatly increase the likelihood that you’ll get a loan:

  • good to excellent credit
  • a business that’s already working and a business plan that shows this
  • experience and/or education in the field of your speciality
  • existing business relationships that show a record of paying in a timely fashion

Having these things doesn’t necessarily make you a shoo-in, but it certainly will tip the scales in your favor.

What if your bank turns you away?
Think about some of the less traditional financial institutions, such as local banks and credit unions. You may also be able to borrow from your IRA or other retirement plan, or from life insurance. Be sure to investigate all the possible tax issues and have a concrete plan in place to put this money back.

Even if you can’t get a loan from any bank
-there are a couple of resources still available to you. You may be able to free up cash by getting inventory on credit. You can also contact companies like Rapid Advance if you have credit card receivables. There are also programs you may be eligible for through the Small Business Administration – even if you can’t get a loan, you may be able to utilize resources here for free that you’d have to pay up-front for elsewhere. Business.gov can also point you to other local, state, and national sources of information and assistance.

Find a business mentor
And if you’re able to get the loan process started, but are at a loss about what to do next, go to SCORE.org to find a business mentor who has been where you are, and may be able to provide some knowledge only experience can bring.

How about your experience with business loans? What financial decisions have you implemented to expand your business?

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Guest contributor Tinu Abayomi-Paul rescues web sites from obscurity and shows business people how to generate leads and traffic from the web. Founder of Free Traffic Tips and Ask Tinu, she is widely published online as an ever effective, end-to-end website promotion specialist — on Web Pro News, Search Engine Guide, and more. Ready to engage on Twitter.com/tinu (@tinu), she’s known to say: “You can’t knock my hustle.”

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