Business loans: What to do when you’re overextended
Getting your business up and running is an important and necessary process if you intend to fulfill your goal of financial independence. However, once the initial steps have been taken, you need to expand your venture so that it continues to thrive in the marketplace. You can accomplish this by providing new goods and services or increasing your capacity for inventory.
While these methods can be effective ways of increasing your business profitability, eventually you will need to find other ideas to maintain growth. Many small business owners opt to expand operations and their customer-base with additional locations.
Financing business expansion
The classical way of getting the capital necessary to accomplish business expansion is by applying for a small business loan. These loans can be accessed through lending institutions such as banks and other private lending bodies. However, be aware that loans can have a detrimental and debilitating effect on your operations.
[Example] market research suggests that there is an untapped market in the west side of town. These customers have the ability to purchase your products, but they are not willing to cross town to enter your store. So you put together your financial records, prepare your profit and loss statements and obtain business references. You also take your business plan, profit projections and summary of costs to your local bank and apply for a business loan.
After some consideration and an almost unbearable week of waiting, you are informed that your business loan has been approved. You quickly take your capital and begin the process of opening your second outlet.
Three months after the grand opening, you are enjoying the fruits of your labor. Your research paid off and customers are purchasing your products at the expected levels. This prosperity goes on for another few months and then you learn to your dismay that a larger chain clothing-outlet has decided to open a store not far from your second location.
Being an experienced business owner, you know that customer loyalty only goes so far, and if the larger competitor begins to offer similar merchandise at competitive prices, you may see your profitability plunge.
Nevertheless, you are also aware the terms of bank loans and the loan repayments do not adjust to your rate of business. Your bank still expects the same payment every month, with interest, even though you have less and less capital with which to run your business.
This situation is going to set you up with potential cash flow problems, because not only do you have commitments to your bank, but you are also committed to your employees and suppliers.
How to survive when the cash-flow is tight?
Being the experienced business owner, you go through your expenses and determine what can be carved away in order to survive this financial bottleneck. Unfortunately, after searching your books and trimming the fat, you aren’t able to make ends meet without closing your second outlet.
The irony is that if you didn’t have the loan repayments to meet, you could “weather the storm” and continue without having a significant impact on your overall profitability and running expenses.
You consider equity investment as an option, but you spent too much time and energy on building your business and you have no interest of letting someone else delve into your profits.
So what can you do to extricate yourself from this situation? Business cash advances have been the choice of many small business owners who wish to get themselves out from under the thumb of a bank loan. Business cash advances do not require repayment, leaving you in control and without having to surrender the independence that got you into business in the first place. Now you can keep your second store open and build on your dream of financial independence.
bank loan repayment business expansion business financing business loans
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