Business financing is not just for startups and companies facing a financial crisis. This is because growing and profitable business can also use financing to their advantage. Successful businesses use additional financing to invest in their growth, such as hiring a larger team as well as increasing their marketing efforts. As your business grows, so can your need for funding.
The good news is that it is easier to obtain financing for an established business than it is for startups. However, there are many stable companies that neglect the importance of additional funding and choose not to grow, either because they are satisfied with their current success or they don’t know how to invest the additional capital.
To help, below are six reasons why a successful company should get additional financing:
1. Expand Inventory
A growing business needs to expand inventory to keep up with increased demand from customers. If you have demand that is larger than your supply of inventory, you can use financing to purchase more inventory and meet that consumer demand. This helps reduce the risk of not fulfilling your customers’ needs and leaving money on the table.
It is also good to take advantage of the buying seasons, such as Thanksgiving and Christmas holidays, and a seasonal inventory expansion is sometimes necessary. Further, you can expand your inventory to increase your product lines. Offering various types of products and items that can cater to different kinds of customers is can be good for your business.
2. Invest in Marketing
Marketing sustains a business and helps a company increase its sales and customer retention. In fact, most successful companies invest in marketing and continue to do so regardless of size. From marketing campaigns, to social media advertising, to connecting with influencers, marketing can take your business to the next level.
You typically have to invest in marketing upfront in order to see a return later. This is why you need financing to help fund your marketing initiatives. It is an investment that can provide your business with long term benefits, which include strengthening your business reputation, increasing your customer base, and bettering your sales with existing customers.
3. Build Your Dream Team
Building your dream team takes a lot of effort and requires an upfront financial investment. However, you can take your business a long way if you are able hire the right people. A growing business needs individuals with different skillsets to sustain its progress, and this could be a lot of work to just put on a few individuals.
To build a winning team, you have to identify what skills your business needs, then find the right people with that skillset who share your passion and vision. This requires working capital for salary and wages as well as taxes and healthcare. Also, before an employee can become a productive member of the team, you have to train them. It is therefore a good idea to use financing to fund the initial hires since it requires upfront capital before you see a return.
4. Acquire New Equipment
Every growing business needs to invest in its productivity. This includes acquiring new assets, building new facilities, and updating technology. If your business uses equipment for its day-to-day operations, it is important to ensure that its up-to-date, efficient, and reliable. Outdated machinery may cause inefficiencies and cost you more money in the long run.
Your successful company will benefit if you invest more funds in acquiring new equipment with greater productivity. After all, new equipment encourages growth. While the amount of money needed to acquire new equipment may be significant, it will typically pay for itself over time. Often, a good way to acquire new equipment is by leasing it, financing it through a dealer, using an equipment financing company, or through an online loan provider like Kabbage or Ondeck.
5. Buy Commercial Real Estate
As your business grows, so does your need for a bigger space. If you are leasing a property for your business, it’s about time to consider buying your own commercial property. If you plan to stay in the same location for more than 7 years, investing in your own commercial real estate might be a better option than leasing.
The money that you spend for a lease is an expense with no chance of a return on investment. However, when you buy your own property, you can pay down your company’s equity and then either sell the property or rent it out later. If you decide to sell, you will recoup your initial investment and possibly earn a return that increases your company’s cash flow, or it can serve as an additional income if you lease it out.
6. Refinance Business Debt
Additional financing is also important if you have existing business loans that you want to consolidate or refinance. If you are looking to increase your company’s growth, refinancing business loans is a critical step, especially when you’re struggling with your monthly payments. A refinance is a good way to help you get better loan terms.
When finding a lender to refinance your existing business loans, make sure that you compare their rates and terms and choose the one that will work to your company’s advantage. Do your research and read about in-depth comparisons for different lenders. Be wary about every small detail, especially when it comes to qualification requirements, interest rates and costs, repayment terms, and how long it takes to fund the loan.
A successful and growing business needs financing to funds its growth. Additional working capital is necessary for companies that are planning to expand their business operations. You should not let growth opportunities come to pass just because you think your company is already successful and stable enough.