If you’re considering business expansion, that’s usually a good sign.

At the very least, it indicates that you are confident enough in the future prospects of your business to justify investing further capital into it. 

If you are in such a favourable position, then you may be wondering just where that business finance capital is going to come from.  In fact, there may be more options open to you than you might initially think.

Using your liquid capital

Perhaps you have cash reserves in the bank.  If that is the case, you may be tempted to simply fund your own business expansion from that source.

There are certain advantages to this approach.  The most obvious of those is that you won’t be paying any form of interest or funding charges on the capital and you have nothing to negotiate with potential providers of funds.

However, there are some things to be cautious about here.

It’s typically good business practice to keep a level of liquid capital in reserve.  Whilst the amount of such a reserve might be debatable, the fact is that any business can be hit by expenses that were not forecast.  In those situations, you may find it advantageous to have cash in the bank to deal with the issue.

Equity release

Another potential option open to you is that of equity release.

This basically allows you to access funds that you may have tied up in existing business assets.  Perhaps the best-known example of this involves property.

Whether you own the property outright or have equity associated with it (meaning that its realistic market valuation exceeds any outstanding mortgage or other loans you have secured against it), it may be possible to borrow against the property.

That provides you with a source of business finance available to deploy in order to support your business expansion.

Business angels

Another option would be to approach what are called “Business Angels”.

These are typically wealthy individuals or collections of such people, who are looking to put money into projects they believe to be promising.

There are certain typical characteristics of this type of investor:

  • projects related to success, such as business expansion, are typically regarded very favourably if all other things are equal;
  • they may be willing to accept a degree of commercial risk over and above that acceptable to other more conventional lenders;
  • as a result of taking on typically higher risk propositions, they may understandably expect higher returns. That might in some cases include taking a percentage of the business concerned and being able to exercise some input or coaching into future development directions;
  • they will typically require strong evidence that the proposing company has both a sound understanding of business metrics and a business plan for expansion in place – including the request for business finance that is on the table.

As a general rule, it might be difficult for a business to approach Business Angels directly. Investors in this category tend to expect propositions to be of a certain minimum standard of presentation quality before they will give them due consideration.

Business finance providers

Another option is to appoint a specialist intermediary provider of business finance to find an appropriate business finding solution for you.

Business finance for expansion is available out there, providing you go about things the right way and take advice from specialist providers of such.

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