Do you have big plans to expand your small business, but do not want to incur debt to achieve those goals? Then you will be glad to hear it is possible to operate debt free – even if you want to grow fast. However, as your business expands, you will encounter situations and challenges that require additional capital. Your business may also need an infusion of cash to be able to reach the next level.
Here are 6 ways you can expand your small business and maintain sufficient cash flow, without taking on new debt.
1. Keep close tabs on cash flow
Many business leaders fall for the myth that small businesses must take on debt to expand. On the contrary, you do not need to borrow money to grow your business or to cover cash flow fluctuations. The first step is to take an honest look at your cash flow. Cash flow is the money that flows in and out of your business at any given time. Cash comes in from customers who purchase your products or services and goes back out in the form of payments for expenses. Does your business have adequate cash reserves? The key is to adopt a few healthy cash flow management practices to safeguard yourself from debt and maintain sufficient working capital.
2. Follow up with late-paying customers
For every customer that pays on time, there is another who consistently sends their payment late. Overtime, this can significantly impact your business’ ability to operate smoothly and grow. If some of your clients are consistently late with their payments or you operate in an industry where late payments are the norm rather than the exception, you can quickly find yourself in a tight cash flow situation. To avoid borrowing money and taking on debt, be sure to proactively follow up with late-paying customers, consider shortening payment terms with clients, rethink your accounts receivable strategy and look into debt-free funding solutions like invoice factoring.
3. Find ways to expand through profits
There are many tactics your business can use to expand through profits, even in the short-term. Ask yourself, are there ways you can raise extra revenue by boosting sales or selling some assets? For some businesses, the best profit boosting opportunities lie in optimizing the relationships they have with their existing customers. Other businesses boost revenue by offering limited-time sales promotion for products and services, offering discounts or coupons or expanding sales in a successful line of products. You can also review your assets to see if there is money tied up in your business that could be used to generate more cash (or reduce existing debts).
4. Build up your savings account
The one thing you can always count on in business is for it to change – and when you least expect it to. From equipment repairs and delayed payments to higher interest rates and new opportunities, unexpected business expenses can come in many forms. One of the best ways to run and expand your business debt-free is to make sure you have enough cash on hand to help you get out of tough spots. How big should your cash reserve be? Some experts recommend having three months of expenses, while others recommend having six months. Ultimately, choose an amount that makes you confident you can keep your business debt-free during a downturn.
5. Identify unnecessary costs
Is your business generating avoidable costs? Unfortunately, small seemingly harmless expenses have a way of maliciously combining to make a real impact on the bottom line. Even the smallest business expenses can add up and push your business into a vicious cycle of overspending issues. Set aside some time to carefully analyze your business needs and goals and evaluate your business expenses. Assess each expense line-by-line to identify unnecessary costs you can either eliminate, minimize or optimize. Ask yourself, does this expense contribute to my end goal? Will my business keep moving forward if I eliminate this expense? Trimming your unnecessary expenses takes effort, but it will ultimately help you keep money in your bank account for further growth.
6. Explore non-debt financial solutions
Believe it or not, there are non-debt financial solutions available that can help your small business grow. Invoice factoring, for example, allows you to easily turn your business’ unpaid invoices into immediate working capital. Because the money you receive is cash your business has already earned and is waiting to be paid, you have no new debt to repay. Your business not only secures the quick access to capital it needs to operate smoothly and expand, but also assistance with managing past-due receivables and other back-office tasks. The key to fulfilling your expansion plans – while also avoiding debt – is to know your options in advance, so you have access to a flexible cash solution when you need it most.
All in all, it is possible to expand your small business without resorting to borrowing. You simply need to map out a plan to minimize expenses, streamline operations, increase profits and maintain healthy cash flow as your business expands.
If you are searching for flexible, debt-free funding solutions, make sure you consider the benefits of partnering with a reputable invoice factoring company like Bold Business Capital. At Bold Business Capital, we help our clients quickly secure the working capital they need to maintain healthy cash flow, expand and build promising relationships with their customers. With our invoice factoring services, you can have cash on hand in as little as 24 hours, there is no debt to repay and you secure unlimited funding potential.
To learn more about how invoice factoring works and how it can help your business grow, contact our cash flow experts at Bold Business Capital to get started.
