6 Smart Reasons to Get a Business Loan

Going into debt for your business can be very intimidating, especially if you are not sure if you should. Here are six good reasons to consider getting small business loans.

Calculating business loans usage

1. To buy needed equipment

A loan will enable you to buy the equipment and machinery that you need to create products or provide services to your customers, or to replace or upgrade the ones that don’t work well anymore. The good news is, if you get equipment loans, the actual equipment can usually be used as collateral for the borrowed money. Just be sure to use the loan to purchase equipment that are necessary instead of nice but optional.

2. To buy additional inventory

You can’t sell a product if you don’t have it in stock, and potential customers will likely go somewhere else if you don’t have what they’re looking for. It is therefore important to have enough items to sell.

A large chunk of business expenses usually goes to purchasing inventory. Replenishing your inventory is not always easy, however, especially if the items (or your entire business) are seasonal. You may need to shell out a large amount of money to buy the stocks before seeing any return on your investment.

When deciding if taking out an inventory loan is worth it, first create a sales projection based on your company’s sales around that time in the previous years. If the projected sales outweigh the cost of the debt, then a loan is something you should consider.

3. To take advantage of a great opportunity

There are times when amazing business opportunities come your way, such as:

  • a popular item in your store is being offered by the supplier at a steep discount if you buy in bulk
  • the space next to your business is now vacant and available to you at a much lower rate
  • you get a big order or land an important client, but you don’t have enough resources

In cases like these, you may not have the needed funds readily available, but the opportunity is just too good to pass up. If your estimated revenue outweighs the cost of taking out a loan, then a business loan is definitely the way to go. Just be sure not to underestimate the total cost or overestimate the profits.

4. To expand your business

If your restaurant is too small to accommodate all the interested diners who come in, or your employees have to make do with cramped spaces at the office, then you definitely need a bigger space, perhaps even an additional location. This costs money, of course, and the funds you currently have might not be enough. With a business loan, however, you can adapt to the demands of your growing business.

5. To hire new talent

When starting a small business, entrepreneurs and their staff typically each take on multiple obligations — sometimes taking on responsibilities that are not suited for their skillsets — just to keep the costs down. But there comes a time when this becomes overwhelming or even inefficient.

Devoting your time, energy, and attention to the nitty-gritty details can make you too busy to plan a growth strategy for your company. A business loan enables you to not only lighten your small team’s workload but to hire people with more expertise in their specific roles as well.

6. To build credit

It is hard for new businesses to qualify for loans because it does not have much credit history yet. Taking out small business loans and being responsible in making the payments will build your business’s credit. The positive credit history and the relationship with the lender will help you qualify if you decide to get a bigger loan in the future.

As you see, there are several smart reasons for getting small business loans. The important thing is to do proper research to make sure that the increase in revenue makes the loans worth it.

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