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Written by Justin Song, a senior research analyst at LendingTree where he has experience covering topics such as personal loans and small business lending.
Making smart decisions for your company is both your privilege and responsibility as a business owner. Chances are, when everything is running smoothly, you still see room for growth and want to explore how you can do so with as little risk to your current processes as possible. Knowing when to be in growth mode and when to hold back is a skill you develop as you become a seasoned entrepreneur. Below are some items to consider when deciding if an expansion if worthwhile.
1. Do you have enough cash?
One problem with many businesses is that they are cash poor. Even if business is booming, if you’re over-extended to business creditors and your debt payments are eating into your cash reserves, then you could be headed into the red even as sales soar.
You definitely don’t want this to happen to you, but there are usually ways to correct this course. First, lower your fixed expenses wherever possible. Do you need a fancy office, or can you get into a cheaper lease somewhere else?
Next, examine your debt: Are you paying too much interest? Is your debt negatively impacting your credit score to the point that you might be denied funding in the future (for reference, a credit score of 660 and above will give you the best chance to qualify for a loan).
Make sure you compare business loan terms before taking on any new business debt. Also, be sure to collect on any outstanding invoices. Consider shortening your due dates to a net-30 or net-15 to make sure you have more cash on hand.
2. Where in the business lifecycle are you?
Businesses often grow on an S-curve and there are three g… Read More
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