Growing your business, whether through increased sales or improved profitability, often means you need to invest more.

Any expansion is likely to require investment, most businesses immediately think of appraching the banks but there are other options to consider.

The options you have are:

• investing previous profits back into your business
• taking out a loan, if the banks have turned you down Enterprise Answers may be able to help.
• selling shares to outside investors
• looking for other sources of finance, including government-backed schemes

Find public finance or search for private finance using the Growth Hub’s free funding search tool

Depending on the option you choose you may need professional advice, you can find a chartered accountant on the Institute of Chartered Accountants (ICAEW) website, or a solicitor on the Law Society website.

Taking out a loan

There are different types of loans for businesses, just as there are for individuals. Unsecured loans are more difficult to access, as the name suggests the lender has no security if you fail to make repayments. A secured loan means you are providing an asset which the lender can take possession of if you fail to make repayments. This may be your house if you’re a sole trader or a business asset.

You will pay interest on any loan you take out and you must make sure your business can afford to make the total repayments.

Lenders will usually ask for a business plan and cashflow forecast before lending to businesses, our advisors can help you write these documents.

Selling shares

If you’re thinking of bringing in new investors, they’ll want to know how much your business could increase in value if they buy shares. To work this out, they’ll need to know how much their investment will increase your sales and profitability.

You’ll need to provide potential lenders and investors with a financial model showing:

• how your business will spend the extra money to increase sales and profitability
• how initial costs and increased ongoing costs will affect your cash flow

Increases in sales usually only happen after taking on additional costs like employing more staff, moving to larger premises or putting in bigger orders for raw materials. You’ll need to take all of these into account in your financial planning.