You may think that taking on any debt for your business is not a smart idea. Depending on the situation, that may very well be true. However, if your business is ready to grow but does not have the working capital to do so, you might want to re-consider applying for a business loan.
Here are three reasons why:
- You Need Necessary Equipment – Purchasing equipment that can improve your business is typically a no-brainer. Every business needs certain machinery, IT equipment, and other tools that contribute to offering your goods or services. In some cases, the equipment itself can serve as collateral for a loan, like a car loan.
We do advise that you separate your actual equipment needs from the things that you would like to have. Most employees would love a game room or a beer tap in the office, but the nice-to-haves are not necessarily your business’s best investment.
- You Want to Purchase More Inventory – Inventory is one of the biggest expenses for any business. You need to keep up with the demand and may even need to purchase large amounts of inventory before seeing a return on investment, especially if you have a seasonal business. Before taking on an inventory loan, it is wise to calculate the cost of debt and compare that to your projected sales. Your lender will help you do this.
- You Are Ready to Expand – If you are outgrowing your office space, it may be time to move to a larger location or add another location. This is usually a sign that business is booming, but you might not have the cash on hand to expand. If this is the case, you may need to get a term loan to finance your move or add an additional location.
Before taking out a loan, make sure that you can cover the loan costs while still making profit, which your lender will help you determine. If you decide to add a second location, be sure to research the potential area first to see if it is a good fit for your target market.
Stay tuned for more reasons to get a business loan!