The Government of Canada has increased the wage subsidy from 10% to 75% in an effort to financially support businesses affected by COVID-19.
Expanding Your Small Business with New Capital
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As the owner of a business, it’s more than likely that your daily goal is to improve as much as possible. For you to grow your company you need to invest in the enterprise and for that, you will need new capital. There are countless sources where you can get your funding from. You can make use of your own personal money, use internally generated funds, borrow from friends and family, seek funding from equity investors, or look to banks and other lenders. When looking for new capital to invest in your business, always consider investors who have previously been interests in you and your company. The people who helped you launch your company may be willing to provide a new form of capital to help you grow it even more. Luckily, it is easier to fund growth for an existing business than it is to fund a start-up, although it’s not a guarantee. There are a few things that you need to understand so as to increase your chances of getting the funding that you want and need.
Understand What Lenders Need From You
It is imperative that you know what a lender requires from you so that you can prepare adequately for the application process and ensure that the partnership will work out. This will make the entire process a lot smoother and will save on time.
When applying for financing, lenders want to see that the cash flow of your small business is positive and that you are creditworthy. Banks and other lenders want to know what the liquidity of your business is and whether or not you’ll be able to repay your loan.
For even more information about what lenders are looking for, click here.
Be Ready With Information When The Lenders Ask For It
This shows the lender that you are prepared and well-organized, which leaves a solid first impression. In some cases, you might need to show financial statements and growth projections for your business. So it is better if you are well-prepared.
Clean Up Your Financial Statements
Many small business owners often fail to spend enough time getting their financial statements in order. In the early stages of your business, you might try to cut costs and self-finance or “bootstrap” your company. Bootstrapping refers to finding means within your business to come up with additional funding. As much as this can be a great way to start your company it could lead to financial issues if you’re not prepared. This is why we suggest that you invest in the hiring of an account or financial officer with accounting expertise to make sure your finances are all in order before you seek out additional funding.
Borrow Only What You Need
For you to successfully expand your business you should only borrow the money you need, becoming buried in debt will only harm your business not help it. You do not want a situation where a large percentage of your profits are being used to pay off debt instead of being used for expanding the company.
Before you borrow any money, think about alternative ways you can come up with extra capital to expand your business. Potential ways to increase your cash flow include selling unused equipment, materials or inventory, negotiating better terms with suppliers and in some cases moving to a smaller location to save on rent.
Learn how to deal with small business debt, click here.
Have a Plan For How To Use The Money
It’s always a good idea to have a specific plan so that you know exactly what the funds will be used for when you are speaking with your potential lender. You should be able to give them as many details as possible. Be very specific about why the money is needed and show how your business will be able to both grow and then produce a profit to pay for the loan.
If you’re currently considering expanding your business here are few ways to do so:
- Finance new equipment and technology: As a small business your productivity level is more often than not dependent on the state of your equipment and technology. Using new capital to buy new and improved machinery or equipment could help you service more clients or sell more products.
- Renovate your business storefront: How a company appears plays a critical role in whether or not customers are going to visit it. If you are a service provider or retailer with a storefront, you should consider the storefront the first impression your customers get of your business as a whole. Improving your lighting, signs or displays could help bring more customers into your storefront.
- Fund new product development: While your products may have initially been successful, there have probably been changes in the market and in the tastes’ of your consumers. This means you may need to modify some of your products. Funding new product development can be costly, especially when it comes to paying for labour and materials. Adding new capital into your business could help you pay for this.
- Hire new employees: If you plan to expand your business you’ll need more manpower. New employees will be able to take on the extra tasks that were created by the expansion.
- Rent a new space: While your current working space might be okay today, a larger space may be required to accommodate the increasing number of staff and equipment. If you have to move to a new location, you will need funds for additional rent and remodeling.
Now that you know how to expand a small business with new capital do not shy away from using some of these tips to grow your enterprise even more. Remember, planning is the key to running a successful business. Plan for the growth and it will follow you.
Vocabulary all business owners should know, check this out.
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Margaret Johnson is in the business of helping Canadians tackle their debt, deal with credit issues, and regain control of their finances.