MThomas
When you are trying to set up a business, you will hear a lot about business loans. You will learn how they can help and more about how they can quash your entrepreneurial dreams. Business loans, like all other sources of funding, have their pros and cons. There are several good reasons to take a new business loan, and here, we are presenting just ten situations that can fully justify taking business loans.
You are looking at a scale-up opportunity
Every business needs to consider expansion at one point or another. There will come a time when your business will need a newer and more prominent location. It will require more funds for moving, furnishing and hiring more employees. However, before you take a plunge, consider your potential increase in revenue. See if it can cover the expenses of the move. You should never take a loan you cannot pay.
Debt management
Multiple businesses opt for better loans to manage existing debts. These new loans are usually business debt consolidation loans that help to pay off outstanding debts. They come with flat interest rates, friendlier APRs, and more extended repayment terms. They often bear extra cash for new business expenses and investment opportunities. Debt consolidation loans are more common than you would expect for most businesses in the USA. Depending on your needs, you can explore online debt consolidation companies or approach your bank for the same. To learn more about business debt consolidation opportunities.
Purchasing new equipment
It can be a part of your big move or merely a part of expanding your business process. New machinery is a must for keeping your business growing. Now, you can always go for equipment financing. However, that involves keeping your new equipment as security for the loan. So before you go for an equipment loan, you need to consider what your business needs and what you want, or you can end up with a severe debt problem.
Getting new inventory
You need to replenish your stock from time to time to stay trendy and popular among your customers. Sometimes, investing in high quality and high-cost inventory is extremely necessary to see a return on the investment. A lot of seasonal businesses take short-term business loans for a quick boost in their stock.
Building your credit score
Some businesses are in perfect shape, and they may not need financing immediately. However, not running financial transactions for an extended period can have a severe effect on your credit score. Not having a strong enough credit score can make it difficult for your business to qualify for good loans with decent interest rates and APRs. Therefore, opt for an easy credit with amicable payment terms. It will improve your credit record and build a relationship with a particular lender as well.
You need to hire new employees
Once you move to a more prominent place with your new equipment and a new inventory, you are bound to feel the need of new talent in your offices. Capable experts in marketing, sales, customer care, inventory management and frontend managers become an absolute necessity for most businesses that are making the big move. Getting an extra set of hands to take care of the new responsibilities will help you pay your loan and scale-up successfully.
New opportunities that balance debt risks
Applying for new business loans can be tricky. However, when you have a unique business opportunity in front of you, you can always do your research on the perks and profits that it will bring. It can be moving to a new location like the neighborhood mall or arcade. If the opportunity outweighs the risks of the prospective debt, going ahead and taking the loan makes complete sense. Sometimes, taking a small credit can help your business make the big leap towards success.
Funding for a new marketing campaign
Marketing is another way to say that your business is welcoming new buyers. It is a brilliant, time-tested way to build visibility. Marketing agencies tend to be expensive, and constructing a new campaign takes more money than a small business usually makes in a month. However, it is a smart investment and not an expense.
Increasing business capital
That is the most common and most justified reason any business owner can put forth before applying for a new business loan. Improving the working cap of any business can help to manage cash flow, cover utility bills, manage other business expenses and even meet payroll requirements. It is indeed the second most common reason most entrepreneurs take out new business loans.
To go online
Today, all the great business opportunities are online. To expand your operations and find new customer bases, you need to find your way to the online market. To make your presence known, the first thing you need is a dedicated business website. You might want to create a regular brand or company portfolio that directs your potential buyers to an inquiry page or your physical address. However, research shows that businesses with a fully functioning responsive e-commerce website often fair better in the market. Building a new site with full e-commerce capabilities and SEO-friendly qualities takes time and money. Most MSMEs and startups opt for business loans to cover the expenses of online marketing and advertising. Again, this is a smart investment and not an added expense.
No matter what your reason is, you need to weigh its potential ROI against the expenses of a possible loan. If the loan risks and the net cost is more than the profit outcome of the new investment, you need to stop and think. Either find a loan that will cost you less or keep the plans on hold till the profit outweighs the debt. Business debts might be useful in many ways, but that does not mean it will always pan out the way you expect them to. Always keep a backup plan. Always research before you go ahead and take a new business loan. Never go for a credit that holds your business at stake.
