Not all small businesses remain 'small' in the strictest sense of the term, and the time comes when any moderately successful business feels the need to expand.
Knowing when and by how much to expand is a crucial factor that a small business owner must keep in mind while planning an expansion.
Business owners, who runs a family owned business realize the first step in expanding a small business is to determine whether it will increase production and if so, will there be a large enough demand for their product in the new area to justify the increased production.
They must first of all know that they can support the increase needed in production by also, increasing the demand.
“Lack of storage space can sometimes be
a great motivation to expand.”
For some business owners, a move can be such a strain on their business that it can cause a huge decline in profits if they do not adequately analyze the demand.
They could then, find they do not have the ROI to justify their expansion just because they did not calculated the maintenance and operating costs.
Another mistake has been made when unnecessarily, hiring extra personnel to handle increased production tasks for expansion instead of adding more training for their existing production staff.
If mass production for a business is not truly needed, an increase of extra manpower can be detrimental.
A lot of times, just maximizing the use of the Internet to outsource tasks will be all that is needed to bring about an increase in products for sales, marketing or, services instead of increasing extra expenditure in-house.
“Another problem in expanding a small business
is the question of funding.”
Typically, most small business owners will seek a business loan to expand their operations, but the danger here is that if the expansion doesn't go according to plan, the business can very easily end up in the red.
Not only could they be faced with the burden of trying to now revive a dying business, but they are also acquiring a history of bad credit, which will make their future funding difficult to obtain, or at least difficult to obtain on their own terms.
One reliable source of funds is the SBA, or Small Business Administration, a branch of the US Federal Government that helps small business ventures and provides a variety of loan programs on easy payback terms.
The SBA also offers many types of grants that are meant to indirectly benefit small business owners, by way of aiding those organizations that provide technical or financial assistance to small businesses.
Monetary grants from the SBA usually go to state and local governments, and nonprofit organizations that act as lending institutions.
"When expanding a small business, the owner can
turn to these institutions for financial aid."
However, they will need a concrete expansion plan and meet certain basic criteria to avail the loan.
The SBA also has special programs in place for women and ethnic minority groups that are designed to encourage independent ventures and expansion of existing businesses.
For small business owners, who have revived their businesses with the aid of an SBA grant the courtesy of a nonprofit lender, the grant may have been the only option they had because;
- they were too unstable to gain approval for a bank loan
- too intimidated to approach non-conventional lenders
- they were afraid they would have to make a large down payment with huge interest rates
With an SBA loan, a small business owner may not be able to borrow the amount they want, they may be at least comfortable with the repayment terms knowing their chances of defaulting are slim.
For more information about other business funding options call 866-688-5660.
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