Expansion Plan and Budgeting

gracer

New member
Hello everyone! :)

As with any successful business, expansion is always part of the growth. With expansion also comes proper planning and budgeting in order for the growth to succeed. In most businesses I know of, owners would usually apply for business expansion loans from banks for them to be able to make the expansion possible. It can either be for buying of delivery trucks, materials for warehouse extension or purchase of land for building a new warehouse, and many other expansion plans.

What do you think is the best strategy in expanding a business? Are business loans advisable or not?
 

David_TR

New member
Re: Expansion Plan and Budgeting

Funny enough, I was JUST reading something about this the other day on a small business page from Michigan near where I'm from that was addressing this: https://www.credibly.com/trending/4-questions-ask-expanding-small-business/

It's mostly for small businesses but I think some of it still applies here. Business loans aren't a bad way to go about paying for it so long as you know you can pay it back fast enough, but you have to make sure you're not going to bring on a bunch of extra expenses on top of your business loan. You also really have to consider what kind of expansion you're doing, where the location is, and whether or not you REALLY need to. Sometimes just a simple warehouse overhaul is enough to free up extra room to help with operations, which is kind of a pain in the ass but WAY cheaper than trying to open a whole second location. There's a lot to think about.
 

explorerx7

New member
Re: Expansion Plan and Budgeting

I believe that it would be advisable to obtain a business loan for this venture where its possible to do so. In most instances, you may not be able to obtain a business loan if you are not able to present a viable plan of action that would convince the financial institution that your project would be feasible, therefore, the application process would be a useful aid to the formulation of your expansion plan. The loan would allow you to be able to utilise funds which would have been tied up to carry out the expansions if you did not have the loan proceeds. This freed-up expenditure could be turning over in the business and would earn revenue which could be of assistance in repaying the loan.
 

Corzhens

Member
Re: Expansion Plan and Budgeting

A business loan is common for expanding the business particularly when the business is gaining a good profit. But the business plan should be clear and validated because a loan can be a big risk. Failure to pay the installments of the loan can result into forfeiture of the collateral. Another option is the added capital. For big companies, they make the IPO - initial public offering - to sell stocks to the public in order to get investors to put in added capital. This option would save the company from paying interest on loans. However, selling shares of stocks is like diluting the capitalization of the company and is only ideal for corporations.
 

gracer

New member
Re: Expansion Plan and Budgeting

Funny enough, I was JUST reading something about this the other day on a small business page from Michigan near where I'm from that was addressing this: https://www.credibly.com/trending/4-questions-ask-expanding-small-business/

It's mostly for small businesses but I think some of it still applies here. Business loans aren't a bad way to go about paying for it so long as you know you can pay it back fast enough, but you have to make sure you're not going to bring on a bunch of extra expenses on top of your business loan. You also really have to consider what kind of expansion you're doing, where the location is, and whether or not you REALLY need to. Sometimes just a simple warehouse overhaul is enough to free up extra room to help with operations, which is kind of a pain in the ass but WAY cheaper than trying to open a whole second location. There's a lot to think about.
The article you shared is indeed just like an on-time answer to the questions I had in mind. :) I consider the expansion of a business a bit scary for a business owner. It's like starting once again, but this time you already have the experience of running a business which you can use to guide you in your expansion. It's a risky move that can either result to success or failure that's why the planning and contemplating need to be carried out well. As what you said, there's indeed a lot to consider and think about when it comes to expanding a business.
 

Lindsay

New member
Re: Expansion Plan and Budgeting

Expanding is scary, but at the same time you know that the company has running well, and that you actually have collatoral this time. It makes it much easier to get a loan, and much less scary when you can secure it against a company asset instead of personal ones. If we know there is an expansion coming up though, we prefer to plan a year ahead, put funds aside and pay for it out of reserves rather than get a loan if at all possible. It saves on interest and arrangement payments.
 

Ankit Saxena

New member
Re: Expansion Plan and Budgeting

Business loans are very common and effective way, as no one is a billionaire before starting a business. However there is a risk involved in repayment of the loan, so the business has to be designed in a way to mitigate the risk of repayment. To design this there are many factors involved such as:
1. Rate of interest of Loan
2. %of loan taken compared to % of self investment
3. % of loan to value of business (turnover expectation)
4. Repayment period or Break even period

All these are very important in planning loans why, when and how much.

Hope this gives a brief.
 
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