As a small business owner, there’s a lot you have to juggle. From financing to marketing to operations, your mind is preoccupied with a variety of daily, monthly and yearly tasks. Sometimes you might be so preoccupied that you don’t realize when you might need some financing help. Check out these five signs your small business could benefit from extra capital.
1. Equipment needs
Most small businesses need equipment. Whether that be large ovens and mixers for a restaurant, a compactor for construction crews or computers and office supplies for your office, your equipment keeps your operations running. However, you might not always have the funding to improve or upgrade your equipment. Or even worse: one or more pieces of equipment might unexpectedly break down and need repairs.
It’s important to identify your wants versus your needs in terms of your equipment. If you’re not fiscally able to support an ice cream machine for your restaurant, hold off until you are cash flow positive for several months. However, if you need new, upgraded or rented equipment for expansion or need to replace any broken equipment, a small business loan or line of credit can help you cover these costs without hurting your cash flow.
2. Covering demands and lulls
Your cash flow can see highs and lows throughout the year, especially if you’re a seasonal business. Let’s say you run a retail business and see a seasonal increase during the winter holidays. You’ll need to purchase more inventory to ensure there are enough hot ticket items customers will want to purchase as gifts for loved ones. During your seasonal lulls, let’s say the non-tax season for accountants, you might need some extra help covering lulls in cash flow, operating expenses, payroll and more.
However, even if your small business isn’t seasonal, there might be times when you see some increases (and decreases) in demand of your products or services. While you might not need as much help, extra capital can still help you during these changes, or simply be there in case you need it.
3. Growth & expansion
Growing or expanding your small business is always exciting, but it’s not always possible without funding. Sometimes you need (or simply want) to expand sooner than you can afford it. That’s where lines of credit come in. Growth and expansion can range from opening a second location, online store, purchasing more vehicles, renovating your existing space or giving your online store a makeover.
If your business is booming and you’re ready to expand it, consider your financing options to see what steps you should take for great growth and expansion. With the right help, you can set aside some funding for your expansion needs, allowing your operating expenses or ongoing projects to continue for your small business.
4. Hiring costs
If you’re growing as a small business, you’ll need to hire more employees. When hiring new employees, you need to calculate the costs. How much will it cost to bring on a new team member (including healthcare, paid time off, salaried position, etc.)? How much time and revenue will it cost to train a new employee? If you’re hiring for a second location, how many new employees can you afford to hire? Conversely, how much positive revenue/income will this new employee deliver back into your business (the ROI)?
A small business loan can help you cover the costs of all of these questions. Hiring is an essential tool for your growing small business, so you don’t want to miss out on this growth opportunity. You also may need fresh talent in areas you haven’t been able to hire yet. Let’s say your products are popular and your current customers are loyal, but you’d still like to reach a wider audience. You’ll need to invest some capital into hiring the right marketing team or agency to help spread your brand to other potential consumers.
5. Purchase more inventory
Inventory can be a heavy expense for small businesses. Much like your equipment needs, keep track of the demand or lull of certain products or services you offer. For example, if you’re a salon and notice a certain trend is in, you may want to purchase more tools to help the potential influx of customers coming in for that trend. If you’re noticing the trend is dying, you’ll likely pull back on those purchases.
You might also purchase more inventory to help you grow your business. Growth doesn’t have to be just hiring new talent, opening a second location or renovating your current location. It can also include offering new or different products or services for your current customers to keep their loyalty and interest or to attract other potential customers.
Sometimes your small business needs some extra financing, and that’s where online lending comes in to play. From expansion to hiring to seasonal needs, your small business shouldn’t suffer or hold back on its goals because you might lack capital. These five signs can help you identify when you should consider borrowing some extra funding and how it can help your small business succeed.