Creating a new business is an incredible undertaking in its own right. But expanding on your success involves new ways of thinking, new approaches to funding, partnerships, and innovation.
The most obvious way to begin your expansion with the resources you need is to take out a loan. While this is a great solution for those who can do so at affordable interest rates, there remains a handful of possible downsides to taking on more debt. Thankfully, when asking “How can I expand my business without taking out a loan?” you have plenty of solutions that don’t include additional loans, with countless opportunities for freelancers and entrepreneurs alike. We’ll take a look at a few of these in this article.
Understanding the pros and cons of borrowing money
The decision to borrow money to grow your company is a big one. While borrowing money can be beneficial, there are also risks involved. The most obvious upside of borrowing money is that you’ll be able to access the resources, staff and technology you need most to expand your current vision. If you have a good credit history, securing loans with more reasonable rates may be possible. Loans allow you to expand without taking on equity partners, dividing your profits, or worrying about paying friends or relatives back, something that can often negatively impact relationships. Still, there are also many cons to borrowing money for your business.
– You will likely have to pay high interest rates on the loan
– You may not be able to repay the loan by the deadline
– Your business may fail and you’ll need a new job while still having to pay back the loan
-Defaulting on your loan or having too many late payments will damage your credit, making it more difficult to access the credit you need in the future.
Find low cost or no-cost ways to expand your business
Taking out a loan is usually the most straightforward way to expand your company. However, there are several low cost and even no-cost ways to grow your business. When we’re in the thick of things trying to keep our business going strong, it’s easy to get tunnel vision and think that we don’t have many options. But this just isn’t so. A more creative and less-costly approach may be exactly what you and your business need.
If you’re looking for more creative solutions, consider applying for grants, crowdfunding, franchising, partnering with other companies or taking on an equity partner. These methods can help you grow and increase your brand’s footprint without taking out a loan.
Explore your options for grants
There’s no shortage of grants available to support small businesses. For example, the Small Business Administration offers a variety of grants for entrepreneurs. The SBA is a good resource for grants and can be found on their website:
https://www.sba.gov/content/for-entrepreneurs-and-small-businesses
We recommend checking out their programs and determining which grant fits your needs best.
Additionally, individual states, counties and cities offer unique programs for small businesses, many of them featuring grants for a range of business types. That’s money you don’t have to pay back. While some grants may not be as large as the loan you wanted, these funds can take a large bite out of your need, get the ball rolling on the initial steps of expansion, and allow you more freedom with less financial strain. Check out the primary business resource websites for your city and state for more information on grants.
Explore your options for crowdfunding
Another superb option for financing your business is crowdfunding. It’s an effective way to raise money without having to take out a traditional loan from a bank. You can crowdfund for general business expansion. However, crowdfunding works best when applied to a specific project, product, or tangible growth strategy. Think about what specific projects or product and service launches you would like to accomplish and create a crowdfunding campaign for these. Here are some tips for using crowdfunding:
Think about what kind of project you want to launch — it could be anything from a new product or service to an invention, or a new and creative way of doing something you’ve done for a while. Be precise.
Keep your breakdown and pitch short, sweet, and simple. This can make things easier when you’re trying to raise money, as it’s less intimidating for people who are unfamiliar with the topic. Trust in your audience’s intelligence and desire to help. But don’t tax their patience with unnecessarily long explanations and complicated charts. Spend some time thinking about the core of your project. Distill it to its essence, map it out in simple, bold terms, and present it with confidence and ease.
Make sure you have a clear goal in mind before going live on Kickstarter or Indiegogo. Know the dollar amount you need to achieve your goals. Be realistic but be careful not to be too conservative with your estimate, simply hoping to not scare people away. If you present your ideas well and justify clearly why you need the amount you are asking for, people will respond.
Use social media platforms like Facebook and Twitter to help spread the word about your campaign and how much has been raised so far. The more people you get talking, the more people will want to partner with you on your journey and benefit from your expansion when it happens.
Communicate often! If people don’t know what they’re getting in return, they might not donate money. And if they do donate, they might not give enough because they’re not being updated regularly. Keep them in the know. Make sure your donors feel like partners in a creative or meaningful endeavor, not like strangers throwing money to other strangers. Communication and excitement are key.
Explore your options for partnerships
If your business is just starting out, there are a number of ways to partner with other companies. For example, you can partner with a company that helps support your audience, markets to a similar customer, or offers products and services that complement many of the things you do without being in direct competition.
Partnering with another company can provide a wide range of benefits, such as exposure for the other company’s products and services and the opportunity for cross-promotion. You should also consider how much control you will have over the partnership if it goes well.
If you’re looking to expand without taking on debt, partnerships are a great way to help grow your business with no startup costs.
Franchising can be a great way to grow a business
One of the best ways to grow your business is to franchise it. Franchising allows you to expand your company into a larger market while keeping control of your brand and not having to take on additional debt.
There are different types of franchisors: Direct franchisors offer complete support for the franchises, which includes training, marketing, resource vendor partnerships, and more. These types of agreements usually allow the franchisee to operate a single storefront or location with the possibility of purchasing additional locations in the future.
Other types of arrangements, like area development or master franchising, offer franchisees the ability to develop a presence in a larger geographical area, essentially giving them business and expansion rights within a region.
In many cases, expanding your business through franchising, if your business model allows, is a less expensive option than partnering with an outside company or taking on additional loans. Oftentimes, offering franchises allows you to widen your influence and the impact of your organization and brand without leveraging yourself too heavily.
Exploring Equity Partnerships
One more road you can take when thinking about expansion is securing equity partnerships. In simple terms, these are like the agreements reached by two parties on the show “The Shark Tank,” where a company offers a future percentage of profit or revenue in exchange for up front cash investments into their business.
This allows you to skip high interest rates and additional credit debt. However, remember that you will probably have a partner for life unless the contract is written otherwise. This means that your new partner will often have a partial say in how and what you do in your business and will continue to collect their profit points as the years roll on. This means less debt and a cash injection for you, but less autonomy and a loss of profits.
Conclusion
You can’t always borrow money to expand your business. Other methods can help you grow and avoid taking out a loan. Find low-cost or no-cost ways to increase your revenue by exploring your options for grants and crowdfunding. Consider different types of partnerships and see if franchising might work as a business growth strategy.
Business expansion is exciting. It can mean greater impact within your market and in society as a whole. It can also translate to a growing income for you, your family and your employees and partners. Still, it is important to do your research, know your finances inside and out, compare your options for funding and use those that offer you the greatest benefit while maintaining a reasonable level of risk. It’s time to get growing. And there are more ways to do so than most business owners might think.
Sound Accounts offers dedicated accounting services to new and growing businesses, helping business owners like you achieve the expansion they desire by helping them manage their budgets successfully.
