Business Renewal Through Asset Acquisition Choices
In last month’s blog, we explored how you can navigate your business through the renewal or decline phase of the business lifecycle. During this decision-critical time, business owners are determining if they want to sell their business or pursue ways to reinvest in and revitalize their business plan. It is important to remember that almost every business is likely to experience a brief period of decline, even one with a perfectly designed business plan. Why? Because you can’t plan for everything—markets and customers change, technology advances, and stable business operations cause comfortability in maintaining the status quo. We are going to examine how business owners can overcome these barriers and pursue business renewal through their asset acquisition choices, leading their businesses into a new lifecycle.
Renewing Your Business
Once you’ve recognized the hallmarks of business decline and committed to working toward renewal, the first thing you need to do is take a step back to reassess. Just like when you first launched your business, you need a business plan—a new one designed to usher your business into this new version of life. When drafting this business plan, think about the ways in which businesses often fall behind in order to determine how best to approach renewing them.
- Are there emerging trends you should be exploring?
- Are you ignoring ideas that don’t fit into your business’s current wheelhouse at the expense of being able to grow?
- Are you focusing solely on existing customers and neglecting to explore emerging markets?
- Are there resources or assets that you need to add to your business in order to be able to avoid decline?
These are just a few of the questions you should be considering as you design a plan to renew your business. As you can gather from these questions, business renewal—no matter how you do it—will cost time and money.
Funding Asset Acquisition
One of the ways you might consider renewing your business is through asset acquisition, which can be a costly endeavor. If this is the path you decide to take your business down, first consider the kind of assets your business will need to usher in a new era of growth and success. The U.S. Small Business Administration (SBA) divides assets into the following categories:
- Tangible Assets—buildings, vehicles, and equipment used for daily business activity
- Intangible Assets—the business’s brand and network
- Intellectual Property—trademarks, patents, logos, websites, software, and more
The SBA notes that after deciding on your needed assets, you should also consider the advantages and disadvantages of buying versus leasing. Regardless of which option you choose, your primary concern will likely be funding these asset acquisitions. Luckily, there are options!
SBA 504 Loan Program
An SBA 504 loan helps small businesses finance long-term, fixed assets—furniture, equipment, commercial real estate, machinery, construction, and building improvements. This loan program may be an option if you have an existing for-profit business with a net worth less than $15 million and an average net profit below $5 million (after taxes for two consecutive years).
Microloans are small loans of up to $50,000 designed to help small for-profit businesses, and not-for-profit childcare facilities, startup or expansion. The average microloan, for those businesses that qualify, is around $13,000 and can be used to enhance your small business through inventory, supply, furniture, and machinery acquisition.
SBA 7(a) Loan Program
SBA 7(a) loans are the most commonly sought after and are used by small businesses because they can help with everything from short and long-term working capital, to real-estate purchases. There are a number of criteria that must be examined for a small business to qualify—credit history, business operations site, and means of income—but it is a worthwhile option when exploring asset acquisition funding.
Let Growth Capital Help!
We know that there are many considerations to make when drafting a new business plan, determining which assets you may need, and figuring out how to fund those assets. Let us help—we love it! Our team of economic development, finance professionals has decades of experience helping small businesses answer the questions you’re asking yourself about renewing your business. Reach out and let us help you start to answer these questions with as little stress as possible!