How to Finance The Scale-up of Your Company

It is natural for business owners to want to expand operations and put their business on a growth path; however, this move requires not only a winning strategy based on market realities, but also the appropriate source of finance.

As a business owner, it is natural for you to desire scaling up your company to seize new opportunities and create a name for yourself. In this expansion drive, you will need two things: a sound business strategy and a clever financial plan that takes your unique needs into account. Scaling up your business may be exciting, but it is also fraught with risks. Take careful decisions, consider all your options and have a back-up plan that will sustain your business. Here’s a handy guide to help you with the process.

Tips to Help Your Business Scale Up
Using the correct mix of financial options: There is no question that expansion requires money, and rather than use up your working capital, choose the right finance from the market. Today small and medium enterprises have access to numerous sources of finance, each with its own unique features and benefits. It is important for business owners to carefully identify the attributes of each option and choose the ones that work best. Instead of going for funding from one source, mix it up. Take a business loan, accept equity investors and see if your suppliers will give you credit. Doing this spreads the risk and is faster than just waiting for a venture capital investment, which will also dilute your ownership.

Understanding the correct debt versus equity ratio: High levels of debt can be particularly risky for a business over a period of time. If a business runs into loss, secured debts can lead to a shut down of the business operations or even loss of valuable assets. To prevent this, it is important for a business to always have a healthy debt and equity ratio. This ensures that even in case of loss, a business has finances to pay off debts.

Opting for a business loan to finance working capital: Working capital is the lifeblood of a business, financing the daily needs that simply cannot be compromised. Without effective funds allocated as working capital, your business cannot expand. In your expansion plans, ensure that you have accounted for it or take a working capital loan to pump funds into your growing company. This will ensure that your business will go on without a hiccup.

Releasing stuck cash from assets: Cash that is tied up in assets can be especially problematic for your growing business. Stuck cash can cause numerous cash flow related problems and prevent efficient utilization of your resources. You should hence make moves to release cash from stocks, debtors and other fixed assets. This can help improve the overall liquidity of your business and increase the cash flow that is needed for scaling up.

Factoring debts to third party organisations: Excessive credit given to third parties and customers can cause high levels of owned debt. In such cases, a business should approach debt factoring agencies. These agencies buy the debts of businesses and take reimbursements from the repayment of the debts. This option is ideal when you are scaling up your business as it helps you get rid of existing debts and also helps you raise finance for expansion.

Make the most of flexible financing with a line of credit: As a growing business, your company and you need to be able to handle ups and downs like pros. This is where flexible finance comes into play. As part of business loans, business owners like you can get access to a credit line facility which gives you a certain credit limit for your chosen duration. You can borrow as much as you want up to the limit and pay interest only on what you borrow. You have the freedom to borrow more when the need arises, and can even prepay without any charge. You can also re-avail prepaid amounts. The best part about a business line of credit is that its monthly EMIs only comprise the interest component, thus helping you manage your cash flows easily. You can pay off the principal at the end of the tenor. Find out more here.

There are many ways you can manage your cash flow when your business is expanding, and the key to making the most of them is to be flexible. Look out for the right investment opportunities coming your way, see if you can get a good deal on a business loan by a lender. One of your options is taking Bajaj Finserv’s Business Loans,which offer financing up to Rs.30 lakh at nominal interest and a convenient line of credit option. You can instantly raise finance to fund your business growth here.

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Everything You Should Know About Working Capital Loans