The Six Common Reasons Business Owners May Need A Loan

Opening a New Location

If you are thinking about opening a new location for your business, then chances are that revenues are up and there is an opportunity to expand into a new market. You should consider a loan that can handle all of the costs involved with securing a space, moving inventory, and advertising the opening of the location. Perhaps you have a restaurant and want to expand to having a food truck. If you are confident that the revenues will increase simply because of the accessibility of your business, then a loan may be the right move to make.

Build Credit For A Bigger Financial Transaction

Perhaps you plan to apply for a large amount of financing. If you are a newer business owner it’s best to crawl before you walk. Take smaller unsecured loans regularly to pay for expenses. This will help with the business’s overall credit history. Getting saddled into a massive loan early in business will make it difficult for growth to take place. Businesses should also consider building relationships with lenders as this increases the chances that repeat deals may be in the future.

Perhaps You Need Equipment

Business equipment can be machinery, tools, or a vehicle. As a business owner, sometimes you can’t pass up the opportunity to automate tasks, speed up production, or increase convenience for your customers. A loan to obtain the equipment you need might be the key to taking on larger clientele. Again, if the acquired equipment will allow the business to increase revenues, then getting the funding needed is a smart idea.

You Want To Purchase Inventory

This section is especially for retail businesses. Perhaps you are offered a large purchase order, but can’t fulfill the order due to cash flow issues. Maybe it’s getting close to the fourth quarter and you want to be ready for Black Friday by having shelves fully stocked. A loan might be a good idea here as well. Make sure that the interest rate does not create a break even situation with the profit. Also, be sure to invest in products that sell frequently or seasonally so that you avoid being stuck with stale inventory. The goal is to avoid doing something drastic like giving up equity or control of your company in exchange for funds.

Business Deal That You Can’t Pass Up

Sometimes the return on investment outweighs the debt. Opportunity has the tendency to knock at inconvenient times for some. An opportunity to acquire land or property presents itself when you least expect it. Maybe you have a high profit margin item that is being offered in bulk at deep discount cost and the funds are not on-hand to take advantage. What if your business is presented with the opportunity to acquire another business? You have to take risks in business sometimes to see the rewards.

You Need to Hire Staff

Getting a loan to make payroll is not uncommon. However, the reason should not be that the business is in a downturn. Perhaps you need to hire summer help to handle additional customers during the tourist season. If it is forecast that revenues will be up during this time and you need a loan to front the overhead costs, then press forward. Maybe you have a property management company and the rentals need work done to attract the interest of perspective tenants. A loan could be used to fund all of the repair work and improvements the properties need. Again, make sure the business is forecast to earn healthy profits to pay the loan off in timely manner.

Getting Started

What do lenders typically look for in businesses? If a company has been in business for at least 6 months and can produce a minimum of 3 bank statements then lenders could begin underwriting to determine the kind of loan and how much to lend. If you are looking to obtain a loan for any of the reasons above you should start the process today. Remember, loans are never bad if it is part of an overall plan to increase revenue.