Credit and Finance, Growth, Management, Hints and tips, Small Business
Tools for Success: How to Finance Expansion in Your Business
Posted on by Jo Shaw
Estimated read time: 4 mins
Expansion is quite often a good marker of success for a business, but reaching that stage is no mean feat. It often takes time and extra business capital – things that aren’t always in plentiful supply when running a business. But if expansion is on the cards for your business in the near future, what are the options available to you?
Here’s our rundown of a few of the most popular methods of securing business finance.
Crowdfunding is a strategy that has increased in popularity over the past few years, with many businesses recognising the benefits of such funding over other traditional methods. This alternative funding method proves to be especially successful if you’ve managed to build a loyal team of customers that share in your vision and excitement for expansion.
Involving a number of people all offering donations or contributions towards investment, this money is then all pooled together to help your business reach its financial target. Funding expansion in this way is often quick and easy to set up, and doesn’t involve giving up any shares in the business if you don’t wish to.
This popular method of raising funds for a business involves selling a part of the business as a share to investors who will then have a stake in your business, including a share in its profits and losses. In exchange, the investors will provide you with money and often advise, support and share their valuable industry knowledge.
The disadvantage to funding through investors in this way, is it will often mean giving up some of the control of your business, something which isn’t always easy if you’ve started that business yourself and been instrumental in its conception.
This is the most well known and straight forward method of financing expansion within a business. Unlike other methods, a business loan does not require giving up any profits or shares in your business. Instead, a business loan is where a lender loans you credit for a specified amount. This will then need to be paid back, along with any interest, before the end of the agreed term.
Failure to pay the loan back within the specified term will have damaging effects on your business’ credit rating and could put your business at risk of becoming insolvent, so it’s so important to only take out a business loan if you can be 100% certain that you’ll be able to pay back both the loan and any interest accrued on it, in full.
But how exactly can you be sure you’ll be able to pay back a loan? This will involve looking at the total amount being borrowed, how long you have to pay the loan back, the loan’s interest rate and your business’ credit rating.
Experian’s Business Loan Calculator is a quick and easy way to find out how much you’ll need to pay on a business loan before you accept it. Simply enter the loan amount, the length of the loan in months and the proposed interest rate into the corresponding boxes, and the calculator will work out your monthly repayments. It will also let you know the amount of interest you’ll be likely to be paying and how much of the loan there is still left to pay at each stage of the loan’s lifetime – all at the click of a few buttons.
It’s an invaluable tool to help you find out whether a business loan is right for you before you make the commitment, so you can make an informed decision about which route to finance is right for you.
Find out more about all Experian’s Business Tools here.