Whenever you’re considering a business loan, it’s quite common to hear different opinions on its application & use. Everyone will have a story to narrate in relevance to funding a new startup.
Though, you do not need to pay attention to all hearsays. Of course, taking a loan to start up your venture may or may not sound suitable due to people around you, however, you must be backed up by your own logic & ethics.
Below are the reasons why you can consider taking a small business loan:
- You’re ready to expand your business–Its time that you start a new location up for accommodating more staff, additional work capabilities, etc. It’s more like you’ve outgrown the size of your existing company. Sounds like you’ve outgrown your initial office location.
This is good for business as it is flourishing & is excepted to do even better. However, whenever you have an expansion plan in the blueprint, it’s quite possible that you do not cash ready. This is where a small business loan will support your idea.
Before you make commitments, it’s important to take measures in favor of the additional revenues. Use a revenue forecasting tool to decipher if you really will have more incoming money. And if you’re eyeing at a good business location, then ensure it’s a good fit.
- You’ rebuilding credit for future borrowings– If you’re looking for working capital for your business, then that could actually be happening because you’re trying to build your business credit. It’s true to say that young businesses face turbulent times to get their loans approved if they don’t have a good credit history on papers. That is where a borrowing a small loan & paying in regular installments can build a tremendous credit for the business.
This can also help to mend a permanent relationship with a credible financial institution, providing an option to go back for more financial assistance.
- You need to buy equipment for your business-
It’s possible to expand your business operations by purchasing equipment that improves your business prospects needs financing. You may need machinery, IT tools , or other equipment to build a good product or offer efficient services and of course a loan to back your expansion plans.
At times, the financed equipment will also be considered as the collateral security against the loan money. However, before you take an equipment loan, ensure you’re breaking up the actual needs against the “nice-to-haves”.
- You’ve found a business avenue that outweighs the mounting
Fortunately, you meet up with a business opportunity that’s just good to pass. Perhaps, you have got the environment to get huge discounts or an affordable expanded retail space for expansion. Under such circumstances, it’s important to weigh off the return on investment of the opportunity against the cost of the loan.
If you expect a far-fetched return on investment over the debt opted, take the offer! While making a fair trade-off, perform a revenue forecast to make sure you’re basing your decisions on pure calculations rather than relying on your hunches.
- Your business needs frontrunners
When working at a startup or small business, you wear a lot of hats. But there comes a time when doing the bookkeeping, fundraising, marketing , and customer service may start to wear on you and your business. If your small team is doing too many things, something will eventually fall through the cracks and compromise your business model.
Some businesses choose to invest their money in their talent, believing that this is one way to keep their business competitive and innovative. This can be a great move if there’s a clear connection between the hiring decision and an increase in revenue. But if having an extra set of hands around helps you focus on the big picture, that alone may be worth the loan cost.
Regardless of the exact reason you’re considering a business loan, the point is this: If, when all costs are factored in, taking out the loan is likely to improve your bottom line – go for it. If the connection between financing and a revenue increase is hazy, take a second look at whether taking out a loan is your best choice.
You want to be confident in your ability to pay back a business loan over time and to see your business succeed. Every business decision involves taking a risk. Ultimately, only you can decide whether that risk is worthwhile.
