Expanding a new business is a journey that hopes to take you through some exciting milestones: your first sales, your first paid employee, your first physical location. As your business grows, you may find yourself planning ambitious plans to expand your inventory, launch new product lines, and even take on a new geographic market or customer base. These are all victories worth savoring.
However, growth is accompanied by costs, which tend to generate faster than cash inflows from new income flows. There is also a potential for misalignment of revenue and cost of the business itself. This gap can be made up by the initial capital of the enterprise, but if not, you need new financing.
The difference between a plan and a successful expansion to the next level of profitability - or growth into an unexpected bankrupt.
Situations requiring financing
All businesses are unique, but fortunately, the most common reason for financing can be attributed to three scenarios.
2. Unexpected recession
Whatever the inherent seasonality of your business, other "curveball" factors can damage your income or increase your costs, such as the world Pandemia.
The economy could fall into recession
Trade wars could push up the price of key inputs
A misjudged ad can lose your reputation and sales.
Your new product may have manufacturing problems
In these cases - none of these are caused by the problems of the enterprise itself - you may find that new capital is an important resource to get through the difficulties. More positively, a timely capital injection can allow you to maintain or increase spending in a downturn: for example, promote your marketing, or lower prices to help your customers and build a good reputation.
【Source text: by report】
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