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It is exciting when your business is expanding, but that momentum can come with risks. Let us go over the 5 most common mistakes growing businesses make so you can avoid them and keep scaling in a smart and sustainable way.
Business Funding Group LLC (BFG) works with profitable businesses to help them secure Small Business Administration (SBA) loans that align with their long-term growth. We have seen firsthand how easily things can go out of control, especially when business owners commit these five avoidable missteps.
1. Undercapitalization
One of the most common errors made by companies is underestimating how much funding is actually needed to support growth. Business owners often budget for the upfront costs of expansion, but forget about the working capital required to sustain it.
An SBA loan could help, but only if you apply for enough! Insufficient funding leads to cash flow shortages, delayed inventory, hiring freezes, and missed opportunities.
Use your SBA loan for working capital strategically. Think months ahead and ensure your numbers account for ramp-up periods, staffing, marketing, and inventory costs.
2. Hiring Too Fast
Hiring is essential, but an error that growing businesses often make is going overboard by bringing on too many people before demand justifies the cost. Payroll can quickly erode your working capital, especially if you do not tie those new hires to immediate revenue growth.
Focus on bringing in the right talent at the right time. Use your SBA funds to bring in high-impact roles, such as:
- Salespeople
- Client-facing professionals
- Skilled operations managers
- Other employees who will help increase revenue or efficiency right away
3. Ignoring Loan Terms
Business owners sometimes accept loan terms that they do not fully understand or that do not match the loan structure to their cash flow, which is another typical mistake committed by companies as they expand.
You might get a short-term loan with a high monthly payment, only to realize that you will not see an ROI from your investment for eight to 10 months. This leads to cash crunches and missed payments.
Not every lender will structure the loan advantageously for your situation, and not every business owner will notice until it is too late. We could help ensure your loan terms make sense for your timeline and cash flow cycle.
4. Not Timing Growth With Demand
Just because you can grow does not mean it is the right time. Sometimes businesses expand before the market is ready. Opening new locations, adding inventory, or investing in new product lines without confirming that the demand is strong and sustainable is unlikely to lead to success.
Consider the following questions before using your SBA loan to launch a new initiative:
- Do we have consistent customer demand for this offering?
- Have we maxed out our current capacity?
- Do we have the team to support this growth?
Tying expansion to how customers and the market are acting reduces risk and makes your loan dollars go further. Exercising such caution could protect expanding businesses from typical missteps and save money in the process.
5. Lack of a Clear Plan
Poor planning is the last common error many developing companies make. Business owners sometimes jump into a big move without fully modeling the ROI, setting benchmarks, or identifying how they will measure success.
Use your SBA loan application process as an opportunity to build a thorough growth plan. It is vital to know your break-even point, identify key performance indicators, and forecast ROI timelines before you spend.
We could help you do all of this. We work closely with clients to structure deals that support your long-term goals, not just your short-term needs.
Contact BFG To Avoid Common Pitfalls While Expanding Your Business
The 5 most common mistakes growing businesses make are usually avoidable with the right financial structure and a clear plan. If you are considering SBA funding to support your next stage of growth, give us a call now!
We do not charge any fees unless your loan closes. We could help you confirm SBA loan eligibility and rules, match your loan program to your goals, structure your loan terms around your cash flow, and avoid common missteps.
Growth should be exciting, not stressful. Reach out today via phone or our fast and simple application online and learn how to expand smartly, strategically, and sustainably!