The Ultimate Guide to Business Growth

Business owner in meeting

Are you a business owner or aspiring entrepreneur who’s ready to take your company and ideas to the next level? Whether you’re launching a new business or seeking funding to grow an existing one—running a business is no small feat. To be successful, you need plenty of grit, perseverance, and of course—capital. 

This guide will walk you through the ins-and-outs of starting, growing and purchasing a business. If your business is struggling to rebuild and recover in the wake of COVID-19, please visit our Small Business Owner’s Guide to Growth and Recovery Post-COVID.

Section 1: Keys for growing your business

In this section, we’ll take a close look at what you need to start or grow your business. There’s plenty to cover, so let’s get started!

Organize Your Financials

Regardless of the size or stage of your business, applying for business funding requires you to get serious about organizing your finances. 

If you’re a sole proprietorship or a first-time business owner, your personal finances (and Social Security number) will be used to determine loan eligibility. If you’re funding an existing business, lenders will want to see everything related to your company’s finances and business credit score (tied to your employer identification number, or EIN), in addition to your personal credit history.

Either way, here are a few tips to help keep your financial house in order so you’re prepared to apply for funding when the time comes:

Protect yourself (and your business)

Depending on the size and structure of your business, you may need to establish an LLC or an S-Corp. While many business owners choose to remain a sole proprietorship, establishing an LLC or S-Corp provides protection from potential legal issues down the road. Unlike a sole proprietorship, which is linked to your personal finances, an LLC or S-Corp separates your business finances from your personal ones. 

If you aren’t sure which structure is right for your business, consider consulting a certified public accountant (CPA) or business attorney who can help advise you on the best path moving forward. The Small Business Administration (SBA) also offers online resources to better understand your options.

Digitize Your Financial Management

Running a small business means dealing with a lot of paperwork—most of which you’ll need to save for future reference. By creating a repeatable, manageable system to organize your business paperwork, you’ll be better prepared for things that may come up, like applying for a loan. 

One of the best ways to do this is to save documents digitally. Start by scanning older documents and filing them in categorized folders on your computer. Depending on the age and size of your business, this step can take some time. The good news? You’ll only have to do it once. Moving forward, switch to paperless billing, invoicing, and even tax filing. Instead of having hard copies of important documents laying around, you’ll have digital files you can access quickly and easily. 

Best practices to keep in mind:

  • When switching from hard copies to digital ones, you’ll want to protect them with a third party secure service and password protection
  • Once saved digitally, properly shred any hard copy documents 
  • Know what personal information is on your computer and in your files

Here’s a list of paperwork you should gather to start this process:

  • Bank records
  • Accounting and bookkeeping records
  • Trademark applications and patents
  • Employee records
  • Contracts, leases, and purchase agreements
  • Permits and licenses
  • Tax records
  • Business filings 

For more information on how to best protect your personal and business information, visit the Federal Trade Commission website.

Track and Audit Expenses

Always track your business expenses. Just like tracking your income, tracking expenses helps ensure things are in order and bills are paid on-time so your business can stay, well—in business. Staying on top of money coming in and money going out will also help you around tax season, because you’ll be able to deduct certain business expenses to lower your taxable income. 

There are plenty of online tools available to help track your small business expenses. Freshbooks, for example, has monthly subscription plans starting at $15, which offers expense tracking features including a place to digitally “store” receipts.  

Get a Business Bank Account

It’s important to separate your personal finances from your business finances as soon as your company starts making money. Even if you’re just starting out, having separate bank accounts will help keep your finances organized, which is especially helpful around tax time. 

If you don’t have an EIN number, you’ll need to either apply for one through the IRS or open a second personal bank account for your business finances. Any money the business makes should be filtered through this designated “business account,” which you can also use to pay your expenses. Instead of playing organizational catch up at the beginning of each year, you can simply look at monthly statements to help determine taxes.

Use Automation to Your Advantage

Still keeping a paper ledger for your business? Lenders frown upon error-prone handwritten ledge, so more and more business owners are using software programs like QuickBooks to minimize the likelihood of human error. 

By using QuickBooks or a similar bookkeeping software, you can automate financial tasks like invoicing, paying bills, payroll, tax documents, inventory, and more. While human error can still happen, it’s less likely to occur with automated software. 

Establish and Manage Your Credit Profile

Financial institutions will use your credit history to determine if you—and your business—are likely to repay debts. Having bad credit can result in being turned down for a loan, or unfavorable interest rates that will increase the cost of taking out a loan for your business—not exactly helpful when it comes to growth. 

Many lenders will rely on your personal credit score when evaluating your loan application. There are six factors that impact your personal credit score and they include:

  • Payment history
  • Length of credit history
  • Amount owed compared to total credit limit
  • Types of credit
  • Number of new accounts opened
  • Credit inquiries

It’s a good idea to regularly request a free copy of your credit report to review it for errors and take immediate action if an error or discrepancy is found.

Though less common, lenders may also review your business credit score when evaluating your loan application. To establish business credit, follow these five steps:

  1. Incorporate your business. Consult with your attorney or trusted advisor to determine which corporate entity is best for you.
  2. Apply for a federal employment identification number (EIN), which acts as a Social Security number for your business.
  3. Open a business bank account.You can do so once your business is incorporated with an EIN.
  4. Apply for business trade credit. A trade account represents credit extended by a business supplier, which allows you to purchase goods or services and pay at a later time. Initially, trade credit approval is heavily influenced by your personal credit score. Other times, suppliers may initially require a new customer to pay cash on delivery (COD) for a period of time before extending credit. Forms of business trade credit include a business credit card and credit from delivery companies like UPS and FedEx, or office supply companies like W.B. Mason and Staples.
  5. Once your lender or supplier extends credit to your business, pay your bills promptly. Payments are reported to the business credit agencies and will impact your PAYDEX score.

Click here for more information on how to best establish and build your credit profile.

Create Business, Marketing, and Branding Plans

Creating a business plan, as well as plans for marketing and branding, is not only good practice for securing capital, but for growing a successful business. 

To get started, ask yourself the following questions:

  • What is your business model?
  • Who are your competitors?
  • How will you position your company to gain a competitive advantage?
  • Who are your ideal customers?
  • How will you reach your audience?
  • What marketing tactics will you use to get customers?

Once you’ve answered these basic questions, you can create a business plan or update an existing one. 

What should my business plan include?

A business plan is an essential tool for growing your business. It’s used to communicate your business goals and strategy to stakeholders, partners, and investors. A comprehensive business plan should include the following:

  • Executive Summary: Provide a summary of the business so potential investors will want to learn more.
  • Industry and Competition: Understand who your target customers are and determine which marketing channels will be most effective in reaching them.
  • Organization and Management: In your business, who is responsible for what, and how are they qualified to fulfill that role?
  • Company Description: Detail your products and services, and provide information on how they help meet the needs of your customers.
  • Marketing and Sales: How will you communicate your offerings to potential customers?
  • Financials: Outline realistic financial projections and a budget that will serve as a guide to continued growth.
  • Target Customer: Who is your target customer? Do you have competition? How can you provide value beyond what’s offered by your competitors?

Hire a Team of Competent Professionals

Even if you aren’t in the position to hire in-house employees, you will still need to surround yourself with a competent team of professionals. Every business—regardless of size or structure—will need the following professional support:

  • Accountant
  • Lawyer
  • Banker
  • Bookkeeper

While you may not need to enlist the help of each of these professionals all the time, it’s important to find trusted, reputable people you can lean on for support when you do need it. 

Businesses that are more established or structured as a S- or C-Corp, may need to appoint a board of directors and/or business advisors. 

Aside from hiring actual employees, business owners can benefit greatly from the help of the following individuals:

  • Mentors
  • Business coaches
  • Business development professionals

Understand the Funding Process

Once your financials are organized, you have a plan for the future, and the right team to support you, it may be time to consider funding to fuel your business’s growth.

To secure funding for your business, you’ll need to thoroughly understand what lenders or investors want to see from applicants. Here’s a high-level overview of what you’ll need to do before submitting a business loan application:

  • Do the necessary prep work: Lenders will want to see an up-to-date business plan which includes an accurate executive summary or capabilities statement. You’ll also need to collect and organize your financials to ensure everything is in order for lender review. Consult the lender’s application guide to confirm their requirements.
  • Know your industry and competitors: Have a thorough enough understanding of your business operations, cycles, competition, and industry trends that you’re able to articulate it to a lender. Analyze what your competitors are doing and have a strategy in place for how to get and maintain a competitive edge. 
  • Understand your financials: During the application interview, a lender will want you to walk through your business’s financials. It’s important to ensure the numbers and story that you present match what’s been reported on your tax returns.
  • Prepare for your loan interview: Review all of your application materials and memorize as much as you can before sitting down with a lender. Demonstrating your industry knowledge, business acumen, and strong organizational skills will speak volumes to a lender. Remember: first impressions are everything.
  • Determine the purpose of your loan and how much you need in advance: Have a clearly defined plan and purpose for the loan and the amount you’re requesting. Be prepared to discuss your project in detail and explain why the amount you’re asking for is enough to cover it.
  • Complete the loan application fully and accurately: Submitting an incomplete or inaccurate loan application is a red flag to most lenders as you’ll come across disorganized or careless. Take the proper amount of time to go through the application multiple times, checking every detail and answer for thoroughness and accuracy. Lenders want to invest in quality, so be sure to demonstrate that you’re a good bet.

Section 2: Strategies for Business Growth

Now that you understand the essential keys to growing your business, let’s look at what’s needed to successfully run your business, as well as strategies to take it to the next level.

Working Capital

Also known as net working capital (NWC), working capital is the difference between the current assets of a company and its current liabilities. 

Examples of current assets include:

  • Cash
  • Accounts receivable (unpaid invoices)
  • Inventories of finished goods and raw materials

Current liabilities are the short-term financial obligations your company owes—typically within one year’s time. 

our business’s working capital is a direct measure of your operational efficiency, liquidity, and short-term financial health. Positive working capital indicates a strong potential for growth and investment. On the other hand, if your current business assets do not exceed current liabilities, this indicates a lack of growth and difficulty repaying loans.

How to calculate working capital needs to start your business

To answer this question, you have to understand how money will flow through your future business—or your  working capital cycle. Also referred to as the “turnover rate,” the flow of this cycle includes:

  • How quickly assets are turned into cash
  • How quickly that cash is used to pay current liabilities  

To accurately calculate how much working capital is needed to start your business, you’ll need to answer the following questions:

  • How many days of inventory do I need to keep on hand?
  • How many days will I give customers to pay me (accounts receivable terms)?
  • How many days will my vendors give me to pay them (accounts payable terms)?

View these greater insights and specific examples of how to calculate working capital to start your business.

How to calculate working capital needs to grow your business

Before you can put a growth plan into action, you need to understand how much money you need to accomplish your goals. Calculating working capital needs to grow a business is similar to doing it to launch a business, with a few extra considerations. For example, you’ll need to create financial projections for working capital, accounts receivable, and accounts payable, as well as changes in inventory, to calculate new working capital needs for growth.

Learn how to get a full understanding of how to calculate your working capital needs to grow your business.

Refinancing Debt

When growth and expansion are on the horizon for your small business, refinancing existing debt can be a great way to free up cash flow to invest back in the business. 

How and why should I refinance debt?

There are multiple reasons why a business might want to refinance debt. Maybe an existing loan is too expensive or risky. Or maybe there’s been a change in your situation since you borrowed money—for example, an improved credit score or an increase in revenue. Whatever the reason, when done right, refinancing business debt can result in a more favorable APR, lower monthly payments, improved credit score, and more. 

What do lenders look for when I refinance?

Like any other personal or business loan, lenders will need to see financial documents to determine if your business is eligible for refinancing existing debt. Before scheduling an appointment, ensure you have the following documents on-hand and prepared to show lenders:

  • Corporate tax returns from the past three years
  • Personal tax returns from the past three years
  • Interim profit and loss statement
  • Interim balance sheet statement

After receiving your financials, lenders will calculate and analyze your business’ EBIDA, or earnings (net income or less) before interest, depreciation, and amortization. This metric is one way a lender can gauge whether your business has the ability to make monthly loan payments. Another calculation lenders will need to analyze is known as the debt service coverage ratio (DSCR)—which shows the current level of debt since the original loan was made. 

Calculating your Debt Service Coverage Ratio

DSCR tells lenders how much cash your business needs to make the yearly payments to interest and principal on the debt acquired for a defined period of time. It also tells you, as a business owner, if your current loan is still beneficial to your business, and whether a refi is appropriate to receive more favorable terms and lower monthly payments. 

To calculate your DSCR, you’ll need to figure out the annual debt service of your business and divide it by your business’s EBIDA. Annual debt service is calculated by adding together monthly principal and interest payments and multiplying the result by 12. 

While every lender is different, the average acceptable debt service coverage ratio needs to be at least 1:1. A lower ratio can signify to a lender that your company does not have the money to make yearly payments—which in turn, lowers your chances for approval.

Purchasing Equipment and Machinery

To keep up with growth and operational efficiency, you may need to purchase new equipment or machinery for your business. Before you do, you’ll need to conduct research to have a thorough understanding of your equipment needs. 

Matching your use of funds to the term of the loan 

Before taking out a loan to purchase equipment or machinery, you’ll need to determine the cost and useful life (the standard for how long the piece of equipment can be expected to be in service). Lenders will want to make sure they aren’t providing a loan that will outlast the equipment that needs to be funded. This will help determine if you need a term loan or a line of credit for your machinery purchase. Here are a few pros and cons of each:

  • Line of Credit (LOC): A business line of credit is similar to a credit card or home equity lines of credit. Once approved, you’ll have access to a certain amount of financing, but you’ll only make payments or incur interest when you use the money. 
    • Pros: Lower interest rate and closing costs
    • Cons: Interest rates will go up substantially if payments are late or missed
  • Term Loan: Ranging from one year to 20 years, term loans provide borrowers with a lump sum of money all at once, with the expectation that the money be paid back over a specific period of time, plus interest. Term loans follow a fixed amortization schedule and are typically secured. 
    • Pros: Flexible repayment periods available with fixed interest rates
    • Cons: Repayment must begin immediately after receiving funds. Closing costs and interest rates are higher than a LOC.

Do your research on the machinery or equipment you’re purchasing to ensure the financing you use for it makes sense. For example, if a piece of equipment is expected to last 20 years, then a term loan may be the best fit as you’ll have that period of time to pay back the cost of the equipment. If you used a LOC to purchase that same piece of equipment, you would need to pay that money back within 12 months.

Purchasing Real Estate

When done at the right time with the proper funding, purchasing a location for your business can help fuel growth and open more doors to opportunity. To help determine if buying real estate is the right choice, consider the following:

  • Am I ready to buy a location? This not only involves analyzing your financials, but your overall situation. Purchasing property for your business is a major decision with long-term implications. Here are some things to help guide your commercial real estate decision:
    • Benefits of buying: Just like home ownership vs. renting, there are clear advantages to owning a building for your business. These include: building equity, stabilizing occupancy costs, preserving cash, and taking advantage of tax savings. 
    • Benefits of leasing: Whether you’re lacking capital to purchase a building or are on the fence, here are common reasons why some business owners opt to lease a space instead of buying commercial property: flexibility to relocate; fewer responsibilities for maintenance and remodeling; negotiable rates; simpler income tax paperwork; no down payment required; freeing up cash without having a mortgage payment.
    • Enlist the experts: If you decide to buy a property for your business, it’s important to have the right people on-hand to help you through the process. Some of the professionals you’ll need to enlist include: attorneys, CPAs, bookkeepers, business development experts, and of course—lenders.

Buying a Business or a Franchise

Whether you’re looking to expand your current business or launch a new one entirely, buying an existing business or franchise might be a good option. Before you decide, it’s important to understand all aspects of the deal and whether it’s the right move at the right time.

What experts can I turn to when buying a business?

For starters, a business broker can help you find attractive businesses for sale and walk you through the acquisition process. Like real estate agents, business brokers typically charge a commission between five and ten percent of the purchase price. Be sure to find a broker you’re comfortable with and trust—don’t let someone steer you in a direction you aren’t confident in pursuing.

Once you find a business you want to purchase, you’ll need an attorney, accountant, and an independent business valuation firm to determine the health of the business.    

What should I look for in a business before moving forward with an acquisition?

Buying a turnkey business can be a great way to start making money sooner than you would launching one from scratch. But just like you wouldn’t buy a house with an inspection, there are certain things you’ll need to consider before moving forward with a business acquisition. 

  • Have a certified business valuation carried out by a certified valuation firm. Look for valuators with the National Association of Certified Valuators and Analysts (NACVA) designation.
  • Have a professional business accountant carefully evaluate the business’ financials to ensure accuracy and thoroughness. If a mistake was made in the past that goes unnoticed, you’ll be on the hook for it down the road. 
  • Before purchasing an existing business, certain paperwork needs to be collected, completed, and filed. A letter of intent (LOI), is one of the most important, as it states the final purchase price, the assets that will be included in the sale, and any other conditions.
  • The business’s current contracts and leases with landlords and suppliers should also be analyzed prior to purchase. This will not only allow relationships to be formed with these key partners, it will also uncover any pitfalls that may exist, such as an over reliance on one supplier. 
  • Certain non-financial factors should also be considered before purchasing an existing business. Particularly, the industry and reputation of the business. It wouldn’t be prudent to purchase a business in a dying industry, or one that’s known for its poor customer service or questionable ethics. 

Considerations for buying a franchise

Starting a business from scratch is one path to business ownership. Another common path to owning a business is to purchase a franchise. While there are a long list of pros and cons to going this route, here are a few fees you can expect to pay if you choose to buy a franchise:

  • Initial franchise fee: Covering the franchise license and the investment made by the franchisors in training and setting up your location, this can range between $30,000-$50,000.
  • Set-up fee: This is also a one-time cost, and covers the expense of getting the business up and running. This can include things like buying equipment and renting out physical space.
  • Royalty fee: This fee typically falls in the six to eight percent range, and pays for the franchisor’s ongoing support. 

Like any investment, do your due diligence up-front. Speak with others who have purchased franchises, and request the franchise disclosure documents (FDDs) through the Federal Trade Commission to get more insight into how the business works and what to expect.

Section 3: Loan Options for Growing Your Business

Now that we’ve covered keys for growing and financing your business, let’s take a brief look at the most common loan options available to business owners in the United States. 

Traditional Bank Financing

Qualifying for a business loan from a bank can be a complex process. Aside from needing to see at least three years of continued profit, banks also require businesses to be structured as an LLC, LLP, S-Corp or C-Corp to qualify for a business loan. Each of these structures provides a clear separation between personal and business finances, and protects the business owners personal assets in case of default. Traditional bank financing also tends to have tighter qualification standards than non-traditional funding options. 

SBA Loans

The purpose of the SBA loan program is to provide greater access to capital to businesses to help them start, grow, and succeed.Backed by the United States government, SBA loans are available to businesses of all shapes and sizes. There are several types of SBA loans available for various purposes. Here are two of them:

  • The SBA 504 loan program is a good fit for purchasing owner-occupied commercial real estate. SBA 504 loans are attractive due to lower down payments, favorable rates, and terms up to 25 years. These loans are structured so that 50 percent comes from the bank and 40 percent from a Certified Development Company (CDC). The remaining ten percent is provided by the business owner in the form of a loan down payment. In order to qualify for a SBA loan, your company is required to occupy at least 51 percent of the building where you do business.
  • The SBA 7(a) Loan Guarantee program is one of the most popular loan options from the Small Business Administration. The SBA provides guarantees to lenders to make them more willing to lend to small businesses and startups with with weaknesses in their applications. While lenders are protected in the case of default, the SBA does not require lenders to accept all 7(a) applications. SBA 7(a) loans are granted for up to $2 million, with terms up to 25 years for equipment and real estate, and seven years for working capital. 

There are several benefits of taking out an SBA loan, including competitive terms, counseling and education, lower down payments, and more. 

Online Loans

Thanks to the rapid growth of the financial technology (fintech) industry, there are multiple options available for online business loans. Due to their independent nature, online lenders are usually able to offer loans to business owners who have been unable to qualify for financing through banks and traditional lending institutions in the past. Other advantages to online loans include an easier application process, faster processing times, and faster funding.  

While online lenders offer convenience, it’s important to do your research before applying with one. Be sure that the loan terms, prices and fees are made clear by the lender, as well as their payment terms. Ask questions about how payments will be made and how often to ensure there are no unexpected or unnecessary obstacles to payment as well. 

Line of Credit (LOC)

If your business is in need of ample cash flow, applying for a business line of credit may be your best funding option. Similar to a credit card, a LOC provides your business with a set amount of available funds that can be taken out and used when needed. There are two types of LOCs:

  • A revolving line of credit allows you to spend up to the credit limit and will not expire or close when funds go unused. 
  • A non-revolving line of credit works by providing you with a lump-sum amount all at once. When it’s paid off, the line closes. Unlike a term loan, a non-revolving line of credit offers lower financing amounts, flexible payment terms, and a higher interest rate.

Regardless of revolving or non-revolving, lines of credit may be secured (requires collateral) or unsecured (no collateral required). Either way, here are a few key benefits of taking out a business line of credit:

  • Evens out cash flow when times are slow
  • Enables you to pay for only what you use
  • Allows you to take advantage of time-sensitive business opportunities that may arise
  • Builds your business credit history

While there are plenty of benefits, there are potential downsides to taking out a business line of credit like higher qualification requirements and low borrowing limits. Like anything else, it’s important to analyze your funding needs and decide if a LOC is right for your business. 

Private Investors

Another avenue for funding your small business growth is to seek funding from private investors. While it has its limitations, there are plenty of benefits to choosing this route. 

One of the main distinctions to keep in mind is that bringing on a private investor is not the same as taking out a loan. While you need to repay a business loan whether or not your venture is successful, a private investor assumes all risk when they choose to invest in your business. In exchange for that risk, you’ll be sharing a percentage of your profits with the investor. Other benefits to using a private investor include:

  • Potential mentorship opportunities
  • Requirements aren’t as strict
  • They are willing to take on more risk than traditional lending institutions


Crowdfunding is a newer option that involves multiple investors lending small amounts of their money to a company or project. Businesses can use crowdfunding to raise money in exchange for equity in the company or future repayment. Businesses can explore crowdfunding opportunities through various online platforms that typically connect them with a large audience for low finder fees. Kickstarter, Indiegogo, and Crowdfunder are the most well known out of the top crowdfunding sites in 2019.

This concept is similar to peer-to-peer (P2P) lending.


We hope our Ultimate Guide to Business Growth provided a strong foundation for you to launch, grow, and sustain your business. By understanding the keys to growing your business, how to finance your growth, and loan options available to fund it—you’ll be well prepared for the journey of business ownership.

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