Cash Flow Solutions

5 Signs Your Growing Business Needs Funding To Survive

Two small business owners look at financing options on their laptop

If your business is growing, you’ve positioned yourself to be in a great space where you have clients and you’re moving in the right direction. But to keep growing, you can’t stop where you are. Part of the growth map of the business has to be continual growth.

Do you remember when you started out on this journey you needed adequate access to capital? This is also true during the growth phase – and it’s no exception. It’s essential for any company to continue to expand and grow their existing business, so it must have capital.

The dilemma when you first started your business was what you needed as far as startup expenses. But now, as you move forward, you have to assess your current situation. As a business owner, it’s crucial that you understand why you may need additional business funding and, more importantly, at what time should you seek additional business funding.

To help you, let’s look at five signs to know when your growing business needs more funding.

1. Cash Flow Management

You’ve heard it time and again that cash is king. In order to succeed as a business, you must effectively manage your cash flow. This is a common issue for many businesses. Ultimately, businesses have to deal with negative cash flow due to poor planning. And because of the nature of some companies, they have to at times spend more cash than is available. This is usually the case for a business that has to stock up on its inventory at certain times during the year. Other businesses may deal with negative cash flow issues because they experience different business cycles or seasonal fluctuations. This would be the case for a business that is busier at a specific time of year.

Whatever the reason, negative cash flow can impact your business tremendously, and this should be a cause for concern. Cash flow is an indicator used by many to determine the viability of a business. You can use business funding to assist you in properly managing your cash flow, especially during your growth periods.

In order to keep growing, you must effectively manage your cash flow.

2. Growth / Expansion

Obviously, we’re discussing funding your business at its growth phase. So let’s discuss specifically recognizing funding needs for specific expansion projects. The type of expansion really depends on the nature of your business. Expansion can mean different things to different types of businesses. So what are some specific expansion projects that your business may go through? Here are some examples:

  • New commercial space / Additional business locations
  • Renovating existing space
  • Offering new products or services
  • Advertising
  • Hiring more staff
  • Expanding marketing strategies

Seeking business financing is a wise choice to fund expansion projects because these projects can make or break or growth potential or plans. So, it’s a good idea to plan wisely to fund them.

3. Cushion

A key to a successful business is effective planning. As part of your planning strategies, you should think about cushioning for risk. Some suggest that as a business owner, you should have a cash cushion of six months worth of operating expenses. This is a great idea because as we discussed, businesses go through different cyclical changes and processes. If this happens to your business, it’s a sound idea to have a cushion.

Additional reasons that having a cushion will help you include planning for a rainy day, shopping for bargains and growing your business. Let’s look at these specifically.

  • Planning for a rainy day: Businesses have peaks and valleys. By having a cushion, you can prepare for the valleys by putting money aside just in case of a rainy day.
  • Shopping for bargains: If you have a business in which you have to shop for inventory, the money that is set aside for the cushion can be used to bargain hunt for inventory and, in some cases, equipment. This can eventually save you money.
  • Growing your business: You can essentially grow your business from the money you finance to use for a cushion. As you continue to put cash aside to use as a cushion, you can reinvest for growth in your business. And as that money grows, you can use it for other items to grow your small business.

4. Hiring

Hiring new employees for your business can seem daunting, but you know that you need the extra set of hands. That means you have to do the math to figure out how much you can afford to pay them. Review all of your budgets and see what you can do. While some businesses cut from certain areas in order to hire new employees, some seek funding initially to assist with this prospect.

Businesses have chosen to fund a new hire’s payroll with business funding, so this can be an option for you, as well. Hiring is especially relevant when you have come to the point in which you need additional staff for the business to continue to grow.

5. Innovation

In order to stay competitive as a business owner, you have to be innovative. With today’s technology, that concept is more prevalent. In the case of small businesses, you have to be able to compete in the marketplace full of larger businesses.

As part of your growth pattern, you may be at a point where innovation needs to take a front seat. Depending on your business, this may be in terms of research and development, technology or the creation of new products or services.

Since you may be at the point where innovation is crucial to growth, you understand its necessity. If you’ve come to this point in your growth plans, then this may be a sign to seek additional funding. In today’s business environment, it’s smart to invest in the innovation of your business.

As a recap, we have outlined five key signs, so you’ll know when you should seek business funding during your growth phase. We hope that some of the signs apply to your business because it means that you’re growing. If any of the signs apply to your business, start reviewing additional business funding options that you can use.

Be sure to research all of your options. To assist you with your research, here are some business funding options you should look into:

  • Alternative small business lenders
  • Traditional bank loans
  • Angel investors
  • Lines of credit
  • SBA guaranteed loans
  • Crowdfunding

While it seems that there is a variety of financing choices to fund your business during its growth period, research all of them. This cannot be stressed enough. A part of understanding the signs of funding a growing business is understanding the best funding choices available. Understand that you’ll have to eventually pay back the loan, and paying it back comes from the profits.

The responsibility lies on your shoulders as the business owner. So let’s review what we’ve learned.

First, recognize the five signs to know when you should seek additional funding for your growing business. Do you fit any of the criteria listed? Or maybe you have come to a place in your business where all of the signs apply to you.

Then secondly, understand what type of funding is best for your business. You have to have access to the capital in order to continue to grow during this exciting period in your business.

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