While you can start a business from scratch and grow it gradually, chances are, at some point, you will need external help. One way to get aid for your business without losing control of your business to foreign investors is by getting a business loan. However, while getting funding will boost your business in various ways, putting your business in debt is a big deal which is why you cannot borrow for the wrong reasons.
Here are good reasons you should consider applying for a small business loan:
1. To increase working capital
This is the capital available to a business to take care of its daily operations such as payrolls and rent. In some cases, small businesses do not have enough earning assets, hence, have limited working capital. Taking a loan can help facilitate the running of the business until it grows and stabilizes. Once it expands, the earning assets become sufficient, and then you can repay the loan.
2. To expand
If you have noticed that your employees no longer fit in their office or that your restaurant is overcrowded then boom! Your business has grown, and you need to expand. Whether you want to get another location or venture into new markets, taking a loan will help you achieve your objectives. However, some phases of expansion such as venturing into new markets can be uncertain hence require extensive research to ensure ultimate profitability.
3. To purchase equipment
Any business needs equipment to run effectively and efficiently. Unfortunately, purchasing equipment is no easy feat, especially for a startup. Whether you need restaurant appliances, computers or IT equipment, you can opt for equipment financing. The good news is, this kind of funding does not require any collateral for security other than the equipment itself. Better yet, once you repay the loan, the machine is yours to keep.
4. To purchase more inventory
Adequate stock is a crucial business element which will help you meet demand and keep your customers satisfied. However, it is a significant investment just like equipment thus making it harder if you need to purchase inventory in bulk, especially for peak seasons. Taking a loan at such periods will help your seasonal business, and again, you will be able to repay after making peak period sales.
5. To hire new talent
Doing everything for yourself as a startup is fine until it reaches a time when handling customers, updating your website and keeping your books starts taking a toll on you. If you or your team has more than they can work on, then their quality of work will be low hence reducing revenue. By hiring new employees, you can focus on the bigger picture thus maximizing income. A loan will help you maintain the new workforce.
Ultimately, the sole purpose of taking a loan is to improve and grow your business. Therefore, consider your reasons carefully to ensure that taking a loan will increase your revenue to enable you to repay the loan and make the risk worthwhile.