Opening a new location is a great opportunity to expand your business by reaching more customers, but it’s also a risky venture that takes a lot of working capital. One way many small businesses budget for the expense of expansion is through regular accounts receivable financing because it keeps their cash flow consistent. Consistent cash flow prevents the boom and bust periods that cause you to dip into financial reserves you’ll need to set up a new shop or storefront.
1. Finance All Your Receivables Regularly
Factoring companies and other lenders offering AR financing provide their best rates to customers whose business they know well. The more often you finance outstanding invoices, the easier it is for them to get to that point. They also provide better offers when invoices are young and customers have a record of paying on-time. Financing every four to six weeks ensures invoices are fresh, and identifying customers who don’t pay in a timely manner to correct the situation is always good for your business.
2. Expand Your Customer Base
The more invoices you have to finance, the bigger your regular lump sum when you do it. If you need extra capital to start covering the expenses of a new location, you’ll need to have a high enough volume of business to basically double your overhead before you have new customers at the new shop. By focusing on expanding until your current shop is as busy as it can efficiently be, you’ll help build cash reserves through accounts receivable financing and increase your income to cover the costs of asset investment and new expenses alike. If you get too busy, you can also farm some of those customers to the new location after opening to keep staff there busy.
3. Scout a Location Near Peripheral Customers
As you expand your customer base to get ready for expansion, some of those customers will naturally be further from your current shop than others. The best way to make sure you’ve got orders at the new location is by putting it near those existing customers who already travel to do business with you. Making it more convenient for them increases the chances they’ll do more business with you and the chances they will help with word of mouth marketing after opening. Whether you purchase the property or rent, accounts receivable financing can help you budget the costs before and after your new location opening.