A lot of startups that experience a fair amount of initial success after they get up and running go through serious financial problems when they’re trying to pursue growth. To avoid these types of growing pains, you’ve got to chart your development track with care. Be wary about the development initiatives that could come back to bite you, and bear in mind that investing too much of your earnings back into the business or taking on too many obligations could put you in a precarious position. To keep your cash flow and expenses in the range that you want, you need to be strategic about how you use your resources and the channels that you choose to expand your operations.
Monitor Your Business Credit
Creditworthiness can make or break your access to financing. Your business credit score will have a determinative impact on whether lenders will be eager to work with you or they’ll deem your startup to be too high-risk.
Sign up for business credit monitoring to know how effectively your efforts to build and maintain credit are working for you. Staying current with what’s happening on your credit report gives you a chance to correct errors and get your tradelines in shape before you apply for funding opportunities. Some credit monitoring services geared towards businesses can point you in the direction of lenders who serve your industry and also give you practical guidance about targeted measures to pump up your score.
Collateralize Your Assets Carefully
Being able to utilize your accounts receivables or other key assets can make you a much better SBA loan applicant. You don’t necessarily have to hand over secured interests on all of your most vital property or financial concerns, but giving lenders security could make you eligible for better terms than you’d be getting without collateralizing a loan.
Lenders that make SBA 7a loan offers typically look favorably on lending applicants with substantive collateral. It mitigates their risk exposure, and being able to afford to purchase and maintain any substantive asset speaks to a business’ sound financial management.
All that said, you need to select collateral with the utmost caution. It’s never advisable to give a creditor a security interest in an asset that comprises a massive percentage of your business’ total operating budget. Likewise, avoid attaching an encumbrance on any asset that you absolutely cannot function without if you have any qualms about your ability to hold up your end of a loan agreement.
Finally, be forward-thinking about tying up assets as collateral if you think that you could generate more value by selling them. When you’re going through financial difficulties, not being able to harness some of the value of a non-essential asset through a sale might represent an undue hardship.
Seek Out Affordable Outsourcing Solutions
Entrepreneurs with modest staffing support may struggle to scale up their operations cost effectively. If you want to expand your service area or reach a broader base of prospective customers, it may take stafftime that you don’t have. Overloading your current staff with many new responsibilities and trying to get the work product of two full-time employees out of just one could send your most valuable team members running for the hills.
Hiring new staff members to handle additional work is a costly proposition. It’s also a risky one because you have no substantive guarantees about whether individual employees who you hire are going to work out. The time and money that you invest in recruiting and onboarding could go to waste. Furthermore, adding new positions may just not fit in the budget.
Outsourcing may be the best way to make growth more affordable and practical. You can utilize a professional outsourcing service for marketing activities and other customer relationship management tasks. Rather than relying wholly on an outsourcing provider to take charge of new activities, delegating some of the stuff that your team handles in-house might be a great way to free up time, so you and your most trusted team members take the lead on bringing your business into uncharted territory.
As you grow your business, your financial risk exposure will take new shape. Be adaptive to risk to protect your profits and optimize your resources. Ultimately, good financial management habits and smart planning can help you get through growing pains.