Spreading the word that you’re in the market for a business loan can be met with all types of opinions. From cautionary anecdotes to general naysayers, everyone you talk to about it will have a story about what can happen if you proceed with it.
Yes, it’s true that not all reasons for taking out a business loan are good ones, that doesn’t mean that there are no good reasons. If you have a business that’s ready to make a leap forward, but you don’t have the funds to accomplish it, here are a few reasons to consider a business loan.
You’re Ready to Expand
If your cubicles are all full and your assistant’s office is in the kitchen, you might need a small business loan. Or, you might run a retail store or a restaurant, and you’ve more customers than you’re able to fit into the space you have.
This is fantastic news! It means that your business is booming and it’s time for you to expand. However, just because you’re ready to grow, that doesn’t mean that you have the working capital to accomplish it. So, it’s time to get a loan.
When it comes to financial management and planning, you’ve got to prepare for the future. If in the future, you anticipate that you will need help with large-scale financing, it’s a good idea to start now with a small, short term loan that you know you can pay back to help you to build your company’s credit.
Young, small businesses can sometimes have a difficult time getting qualified for larger loans if both the owners and the company itself don’t have quite a strong credit history. For this reason, taking out a smaller loan and then making the payments on time will build the credit history for the business in the future.
You Need Equipment
Buying equipment that your business needs is generally a no brainer when it comes to financing. You need a bit of IT equipment or specific machinery or some other type of tools or materials to make your products and perform your services, and you’ll need to get a loan to finance the purchase of it. (Side note: if you use equipment financing as the type of loan, the equipment itself can serve as the collateral for the loan.)
Before getting an equipment loan, you need to ensure that you’re separating your company’s actual needs from the stuff you just kind of want to have because you think it would be nice. Knowing the difference is essential in determining your bottom line. Yes, it’s probably true that the employees might like to have a margarita machine in the breakroom, but unless you’re running a Mexican restaurant, that specific piece of equipment might not be in the best interests of your business.
Regardless of why you’re considering a business loan, the point is that when all of the costs have been factored in and taking out the loan will be likely to improve your bottom line, you should go for it. If the connection between an increase in your revenue and the financing itself is a bit sketchy, take another look at whether or not getting the loan is the best option.