As a small business owner, you’ve poured your heart and soul into building your company. Now, as you look to the future, you see opportunities to grow and expand. Expansion can be exciting and rewarding, but it also requires careful planning.
In this article, we’ll explore the signs that your business might be ready for expansion, the different types of expansion opportunities, and how to prepare for the process. We’ll also discuss why SBA loans can be an attractive option for small businesses looking to expand.
Whether you’re dreaming of opening a second location, launching a new product line, or tapping into a new market or business segment, having a strong plan for your expansion and how you’ll fund it, is crucial to avoiding high cost loans that put your business at risk.
Signs that it’s time to expand your business
How do you know when it’s the right time to expand your business? Here are some telltale signs:
- Your sales are strong and your revenue is consistently rising: You’ve seen steady growth in your income over time, not just a short-term spike.
- Your customers are asking for additional products or services: If you’re getting requests for items you don’t currently sell or services you don’t provide, it could be time to expand your offerings to meet that demand. Keep your ear to the ground for this information, as this is often an overlooked expansion opportunity.
- You don’t have enough storage space: Running out of physical space to store inventory or equipment is a clear sign it may be time to upgrade to a larger location.
- You have an opportunity to move into new locations or markets: Maybe you’ve identified a neighboring town that doesn’t have a business like yours. Or maybe you’ve found a chance to sell your items to a completely different kind of customer or business.
If you notice any of these, it could very well be your time to start planning for expansion.
Types of Business Expansion
Small business expansion can take a few different forms:
- Physical expansion: This could mean opening a new location to reach more customers. Or, it might involve expanding your current facility, whether that’s moving to a larger space or adding on to the building you’re in now. Keep in mind that making improvements to a leased space is an opportunity to expand as well.
- Product or service expansion: Could you introduce new products that complement what you currently offer? Is there an opportunity to provide an additional service to your clients? Let’s say you own a clothing boutique that’s focused on womenswear. Expanding into menswear or children’s clothing could open up whole new revenue streams.
- Market expansion: There may be chances to serve a different geographic area or customer base. Maybe you started out selling to consumers, but now you see potential in selling to businesses. Or perhaps you have an opportunity to open up in a different city, state, or even country!
- Digital expansion: In today’s connected world, a digital expansion can be just as impactful as a physical one. Boosting your e-commerce capabilities, improving your website, or offering virtual services can help you tap into new markets and better serve existing customers.
The type of expansion you choose depends on your specific business and goals. But they all require careful preparation.
Preparing for Expansion
Before you dive into growing your business, you need a clear plan. If you have a current business plan, update it to include details about your planned expansion, including:
- Your current setup, like your inventory, vendors, and distribution: How will an expansion impact these areas? Will you need to find new suppliers who can handle increased volume? Should you revamp your inventory management system?
- The exact goals you want to achieve through expanding: Be specific about what you hope to gain, whether that’s a certain amount of revenue growth, a percentage increase in customers, or a measurable boost in market share. Clear targets will help you create a focused plan.
- Any extra resources you’ll need, like staff, space, or equipment: Expanding often requires investing in additional assets. Will you need to hire more employees? Should you upgrade your technology? Factor these needs into your plan and budget.
- How you’ll pay for the expansion: This is perhaps the most critical part of the planning process. Expansions cost money, so you need to have your financing lined up before you proceed.
Funding your business expansion
Securing funding is one of the biggest pieces of the puzzle. You might be thinking about using your business savings or personal funds. And in some cases, that could work. But it’s wise to talk through your options with a financial expert you trust. They can help you figure out, based on your available funds vs. operating costs, if it makes more sense to get a loan and keep your savings set aside for future needs.
There are a few different ways to finance an expansion, like loans, investors, and crowdfunding. Each has its pros and cons. But for many small businesses, an SBA loan is a smart choice.
Why SBA loans are good for expanding businesses
SBA loans, backed by the U.S. Small Business Administration, are designed to fuel small business growth with attractive terms and rates.
Compared to other financing types, SBA loans offer the flexibility and breathing room small businesses need to expand sustainably, providing capital to grow without overburdening cash flow. This is because SBA loans offer longer repayment periods than bank loans (10 years, vs. 5-7 at a bank), which can reduce monthly loan payments by up to 30 percent. This frees up significant cash to reinvest in your business.
Competitive interest rates are another advantage, as is a lower down payment. And thanks to recent SBA changes, there is the potential for a 0% down payment for some business expansion cases. This also allows you to preserve cash for other needs.
Unlock your growth potential with the right expansion financing
Expanding your business is exciting, but it’s also a big decision! A well-thought-out plan is essential, including carefully evaluating funding options. If expansion is on your radar, explore SBA loans and seek expert guidance. With proper planning and support, your business growth potential is limitless.
Are you considering expanding your small business? Grow America’s team of experienced lending professionals is here to help. We offer SBA loans in addition to a wide variety of regional and local loan programs and guide you through the process, from assessing your needs to securing the best financing for your growth plans. Apply for a loan today and take the first step toward achieving your business expansion goals.