Growing Pains: Creative Financing for Your Expanding Business
What happens when money and a good marketing plan get together under the sheets? Record sales, that’s what. But, many businesses can’t handle explosive growth. They need too many new employees, new equipment, and all of their money just went into a blockbuster ad campaign. Here’s how to finance that growth so you can knock it out of the park.
Get a Loan
A business loan is the most obvious choice, but a lot of banks won’t fund expansion projects unless they’re modest and you already have a proven track record. If you’re starting out, or you’ve only been in business a few years, good luck with the big banks.
A smaller lender like BCBL can give you bad credit loans for business, and they can be helpful, especially since the qualification process is streamlined and simple. Bearing that, you’ll have to turn to your own in-house funding sources.
Use Cash Value Life Insurance
Probably the most underrated financial product in existence, cash value life insurance was responsible for Walt Disney’s success in starting Disneyland – a venture no bank would back because they thought it was too risky or silly. But, Disney was determined, and decided to cash in his whole life insurance policy for a chance to change the world, and he did.
According to Disney, “It takes a lot of money to make these dreams come true. From the very start it was a problem. Getting the money to open Disneyland. About $17 million it took. And we had everything mortgaged, including my personal insurance… We did it (Disneyland), in the knowledge that most of the people I talked to thought it would be a financial disaster — closed and forgotten within the first year.”
J.C. Penny owes its success to life insurance. During the stock market crash of 1929, the company faced serious setbacks. Its chain of department stores was devastated. James Cash Penny (the founder) used money from his cash value life insurance policy to help make the company’s payroll and day-to-day expenses.
The Pampered Chef, McDonalds, Foster Farms, and Stanford University were all saved by life insurance. Take a page out of some of the most successful companies and organizations in the world.
Get Funding Through Factoring
It’s not the most attractive method of raising money, but it works. Factoring is the process of selling your accounts receivables (your invoices) to a third-party factoring company. They will typically pay you up to 80 to 85 percent of the total value of the invoices, plus a small fee for the transaction.
Sure, you lose some traction on the deal, and you won’t be paid full invoice price, but it frees up cash quickly. And, when you’re hungry for cash and you’ve got nowhere else to turn, this can be one of the best options out there.
Of course, this option only works when you have sales coming in, so if you’re in mid-growth, and you can’t get your invoices paid fast enough and you need cash now, consider selling them – especially if your growth is outpacing what you’re losing by doing a factoring deal.
Dennis Firth works as a business consultant. He likes sharing his insights on the Internet. You can find his posts on many finance and business blogs.