7 Signs it’s Time to Take Out a Business Expansion Loan

Business growth isn’t just a concern for business owners. Governments worry about it too.

In 2016, for example, the Canadian government committed around $1 billion for business growth programs.

Of course, not every business qualifies for incubator status or for funding. That means you must look for capital elsewhere.

One option is seeking out venture capital, but that means giving up equity in your company. This is often the right option for businesses that need a massive influx of cash.

Another option is a business expansion loan. Expansion loans are generally smaller and geared for businesses looking to scale up over time.

If that sounds more like you, let’s look at some signs it’s time for you to take out a business expansion loan.

We even put together this comprehensive guide to funding from Governments, Banks and other equity capital sources in Canada and the USA.

1. You Turn Away Customers

It sounds like a dream come true, right? So many customers want your service or product, you can’t take them all on.

It’s a dream come true if you’re content with your business as is, but not if you want growth.

It’s true that there are potential pitfalls to rapid expansion, but there are also pitfalls to not expanding.

Good employees looking for advancement will jump ship from a stagnating business. The loss of those employees undermines your existing services and can damage morale.

You also run the risk of alienating potential customers or driving them to competitors. You might even find yourself with a reputation as someone who only does business with certain people.

A business expansion loan helps you scale up at a controlled pace, which helps offset the expansion pitfalls.

2. You Delegate Crucial Tasks to Unqualified Employees

Most entrepreneurs know they must start delegating at some point. As your business grows, the demands on your time will outstrip your available time.

Delegation isn’t simply a matter of telling someone to do something. You must assign tasks based on ability and knowing employee strengths. For example, you don’t assign internet research to your resident technophobe.

Some tasks are crucial to business survival. An overworked, overtired business owner can fall into the trap of assigning these tasks to underqualified employees.

A receptionist might excel at maintaining your calendar, but it doesn’t mean he’s ready for creating meeting agendas. That’s a job better suited to an administrative assistant.

An accountant excels at reconciling the books or prepping profit and loss statements. A CFO focuses on long-term financial strategy and capital investment. Saddling your accountant with CFO responsibilities sets you both up for trouble.

A business expansion loan helps you finance hiring qualified employees for crucial roles.

3. Space Is at a Premium

Do your employees stumble over each other as they go from point A to point B? Is putting another desk in an epic struggle?

Cramped workspaces aren’t just annoying, they create some real consequences. Noise is a major distraction for employees and cramped work areas are noisy. Distracted employees get less done.

Cramped workspaces increase the odds of sick employees passing around an illness. This problem is worse if you use an open office design.

Securing a larger office or building doesn’t come cheap, but a business loan can make it feasible. Plus, moving can reduce the productivity and health consequences of an undersized space.

4. Consistent Profitability

Any business can see a profitable month or quarter. That can stem from seasonal factors, a viral mention online, or a fad.

A company that makes quirky t-shirts might see a big uptick in sales because a celebrity wore the shirt in a selfie. That uptick in sales probably won’t last.

A business that stays profitable for several years is another story. It’s a clear sign that your product or service has staying power. It also means that you worked out the kinks in your business model.

A product or service with staying power and a functional business model sets you up to open new locations or expand to a new region.

5. Viable Related Products

Let’s say you make and sell high-end chef knives. If your customer base is strong, you can reasonably expect some interest from them for other kinds of knives.

You do some market research, poll your customers, and test price points. The research says the market is there and you can sell at a profitable price point.

You’ll likely need a retooled or expanded production facility. If you can’t finance it out of pocket, this is where a business expansion loan is ideal.

6. You Use a Training System

Business expansion is as much about people as facilities and products.

Say you open a second location. You might import a manager or supervisor. Odds are good that most of the employees there didn’t work at your first location.

If you want similar results, you need a formal training system. That doesn’t just mean training on using your POS system or rules about product displays. Your system must also instill brand values and customer service expectations.

Without that system, the second location will develop a separate culture with its own rules and norms.

You can use a business expansion loan for printing up training materials or hiring trainers. It can even finance hiring someone to help you formalize your training program.

7. Acquiring Another Business

Expansion doesn’t always mean building it yourself. Maybe you see an opportunity for expansion in a related area, but you lack the in-house skills and resources.

If you know of a small business in that area, you can put an offer on the business. You acquire the right skills and resources in one move.

Assuming you built a solid business plan around the acquisition, you can probably secure a business expansion loan.

Parting Thoughts on Taking Out a Business Expansion Loan

Expanding your business almost always demands extra capital.

You have options, such venture capital, angel investors, and government programs. You can also opt for a more traditional business expansion loan.

Business loans are best when you can define your expansion needs, such as a larger space, additional hires, or ramping up production.

Pinnacle specializes in helping businesses secure financing in Canada and the US. For project proposals or more information about our services, please contact us today.