Growing Your Small Business — Legal & Financial Concerns
If your business takes off and becomes a success, you may want to build on its success to make it even more profitable. There are a few different ways in which you can pursue this goal, such as by acquiring other businesses, entering new markets, or bidding for government contracts if your business is eligible. In many situations, a business owner will need to raise more funding to bolster their expansion plan. This is similar in many ways to raising funding for a new business, but the process has some differences as well.
Sources of Funding
As an important preliminary step, you should evaluate the strengths and weaknesses of the funding options that may be available. Just as when you started your business, you may be able to consider loans and crowdfunding. This process may be easier than when you started your business, however, since the business will have created a track record of financial reports and a credit history, which should show lenders and investors that it is a strong choice for funding. If you are not able to get a business loan, you can explore getting an SBA-guaranteed loan. This may convince a bank that lending to you carries less risk.
You can also consider selling ownership in your company if you are running a corporation, LLC, or partnership. This will reduce your control and the control of any other existing owners, which may be a downside to bear in mind. You may need to notify your state if you sell shares in your corporation, and you would need to comply with your internal governance documents, such as articles of incorporation and bylaws. Similarly, you may need to notify the state if you are bringing new members into an LLC or a partnership, and you must follow the procedures provided by your articles of organization and any other governing documents. Adding new members to an LLC or partnership involves giving them a percentage of ownership in return for making a capital investment.
Making a Case for Funding
To show that your business is a good choice for investors, you should put together financial records that show its success over time. If you have not yet achieved a history of success, you should be ready to explain how more funding will make a difference. You should get a business credit report and make sure that it is accurate to prove that you are a trustworthy manager of finances. Going through a business valuation, either on your own or with the assistance of an appraiser, can be important to show outsiders how your business has grown. You can also put together a presentation on how you expect the business to grow in the future, including its projected revenue and expenses. This forecast can be based on both objective data and your personal analysis and judgment, although any opinions should be clearly supported.
Ultimately, you should put together a statement with the total amount that you are seeking and the reasons why you need it. You should explain any distinctive factors that affect your need for funding, such as a need to acquire new equipment or expand into a new market. Your business plan also should explain who will be managing the funds and showcase their knowledge and experience, reassuring investors that their money will be capably handled.
