Bad Credit Business Financing: Invest in Added Value for Your Business
When a business must grow through bad credit, it is important to allocate all financing in as directed and strategic a manner possible. Putting financing towards projects that don’t have potential to recoup value over time can put a business in a sticky situation in the event that a variable in their strategy was miscalculated or anticipated demand for a product or service is below what was predicted. Added value to a business can take different forms, from more loyal. and highly trained employees, to more owned equipment or an owned commercial location. When allocating cash flows or planning on putting alternative capital to work, small business owners should think about the potential value their business will gain.
Long term value versus short term growth. Long term value for small businesses comes in the form of assets that retain their value while in turn contributing to a small business’s ability to generate revenues. In contrast, some investments, such as increased marketing through banner ads, can create a burst of short term growth in sales, but with the disadvantage of quickly dissipating their effects once discontinued. For small businesses where bad credit is a factor, choosing a careful balance between long term and short term growth projects is the safest way to keep growing. In the event that a short term project fails or performs at an underwhelming level, then value can be retained through the continued performance of a long term asset, or recouped through the liquidation of an asset such as a piece of equipment.
Having assets down the road has the advantage of offsetting some bad credit. For business owners who are looking to graduate over time from alternative capital to traditional small business loans, adding valuable assets to their business is a great move because they will have more assets with which to secure financing they apply for later on down the road, making it cheaper for them. A long term oriented strategy is beneficial to business owners with bad credit, as it allows them to take control of the direction of their financial situations and steer themselves into a beneficial position.
Photo Credit to Wendy on Flickr