So, I understand you’re considering a loan for your business. Spreading the word about it with friends, family & colleagues can get you all kinds of opinions. From naysayers to cautionary anecdotes, different people will have different stories as to what may happen if you take a business loan to expand or start a new business.
While it’s true that some reasons can be bad to go into debt for your business, but it doesn’t mean that the good reason just don’t exist. If you’ve everything planned out and your business is all set to take the next leap, but you don’t have the capital to do so, then here are three reasons that you should re-consider before you apply for fast business loans.
You’re All Set To Expand Your Physical Location: Your office cubicles have started to be busted at the seams, and your new employee had to set up shop in the kitchen, sounds like you’ve outgrown your office location. Or many be you’ve more customers coming in and out than you can fit inside your restaurant. Well, this is great news! It means your business is booming and you need expansion. But, just because you’ve now more customers coming in doesn’t mean you’ve capital to make the necessary expansion.
So, in such cases, you may need a business loan to fund your big move. Whether it’s picking up and moving or adding an additional location, the change in overhead and up-front cost will be significant.
Therefore, before you commit, figure out the steps to measure the potential change in your business’s revenue that could come from expanding your business. Will you be able to cover your loan payments and still make a profit? And, if you’re considering opening a second branch or second retail location, you must research the area first and make sure that it’ll be a good fir for your target market.
You’re Building Credit For Future: If you’re planning to apply for a large scale loan in next few years, then you should go with a smaller business loan first, in order to build your business credit. Young businesses often don’t qualify for large-scale loans if both, owner as well as the business doesn’t have strong credit history. But, taking small-term loan initially and making on-time payments will build your business’s credit well in the future.
This strategy will also help you build a good relationship with the lender, providing you good connections to go back when you’re ready to take out large business loan.
You Need Equipment For Your Business: Buying new equipment to improve your business offering is usually a no brainer for financing. You’ll require certain tools, IT equipment or machinery to make your product perform your service. And, you will need funds to finance that equipment.
But, before you take out an equipment loan, you need to remove or separate those nice-to-have things’ list when it comes to your bottom line. Of course your employees would love a margarita machine, but unless you’re running a Mexican cantina, that equipment may not be in the best interest of your business.
Regardless of what exact reason you’re considering for a business loan, the main point is, when all costs are factored in, taking out a small business loan initially is likely to improve your business – so, go for it. And, if the link between financing and revenue increase is indefinite, take a look at whether taking business loan is in best interest for your business.
You must be confident in your ability to pay back the loan over time and your business is succeeding. Every business is built upon taking risks, and ultimately, only you can decide if the particular risk is worthwhile.