How to Grow Your Business with Minimal Debt

If a penny saved is really a penny earned, then you should not overlook the importance of minimizing your burn rate in order to grow your business successfully. If you can reduce any of your regular expenses like cost of raw materials or labor, you can instantly increase the amount of growth that you will be able to achieve with your current amount of capital.

Negotiating Favorable Terms

Net 30 payment terms are probably the standard in your industry, but that doesn’t mean that your suppliers are not going to be willing to negotiate with you if you ask them.

If you can get some of your suppliers It seems like the topic of debt is one area where business owners often fail to practice what they preach. Many business owners who would never fall into any troubles with debt in their personal lives have fallen prey to those exact situations when it comes to their businesses.

Handling the finances of a small business is kind of like handling your personal finances on steroids. The numbers are often much larger than the personal finance numbers you are used to handling, which makes every little detail incredibly important. This leaves many business owners underprepared and can cause them to overreact during difficult cash flow situations.

If you have been placed in charge of your own or someone else’s business finances, you will no doubt encounter times when the money gets tight and the cash flow dries up. Having a significant amount of outstanding debt only compounds these situations, and borrowing more money often just makes the situation worse.

In order to minimize your exposure to situations like this, it is a good idea to run your business with as little debt as possible. Here are five great ways to grow your business fast without having to take on any debt to do so:

Self-Funding

The most obvious way to avoid taking on business debt is to inject your own savings into the business. Of course, this strategy assumes that you have the capital available to you personally, and that you are willing to risk it.

Business owners who choose to self-fund often believe that the best investment they can make is in themselves, but this can also leave them exposed personally should the business fail.

Trading Equity

Another way to inject capital into your business without borrowing the money is to sell equity in the company to an investor. Many great businesses have seen tremendous growth from bringing on minority partners to instantly increase the funds available to grow the business.

Minimizing Burn Rate

to agree to give you more lead time on paying their invoices, you might be able to make and sell a product before you even have to pay for the raw materials. This would dramatically improve your ability to grow debt free.

Managing Accounts Receivable

Another simple solution to improve your cash flow situation is to better manage your accounts receivable. This can be done by better enforcing your terms with customers either yourself or by contracting a commercial debt collection agency to handle delinquent accounts for you. Either way, you will be getting more money into your business sooner.

Growing a business is a difficult task that can take a tremendous amount of capital. If you don’t have that capital or are burning through it too fast to make it to profitability, you are likely going to be tempted to take on debt to bridge the gap. This is almost always a recipe for disaster. Get creative and try to find a way to avoid taking on more debt at all costs.

By | 2017-05-10T13:39:25+00:00 February 28th, 2015|Blog|0 Comments

About the Author:

Graduated from University of Utah - business degree 1990. Served in US Army as an interrogator / linguist, then as a tactical intelligence officer - Military Intelligence 1986-1990. Managed Western US sales operations for NY based collection agency 1990-1992. Founded Direct Recovery Associates, Inc. 1992-present