For some, taking out a business loan is a no-brainer. You’ve got a growing business that is scalable, but you’re missing the ready cash to invest in the business. Alongside all this, you’ve got a healthy set of accounts and assets against which to secure a loan.
For others, things might be a bit trickier. You want to invest in the business to see it reach its potential but your accounts aren’t in great shape and your cash flow… well, let’s just say it’s a sensitive subject.
Whichever category you fit into, committing to taking out a business loan is an important decision and not one to be taken lightly.
Below, we look at some of the reasons that you might want to seek out finance for your business.
“Committing to taking out a business loan is an important decision and not one to be taken lightly.”
Smart reasons to take out a business loan
“If your business is going from strength to strength and you are having trouble keeping up with demand, borrowing cash to fund the purchase of equipment that allows you to ramp up production can be a smart decision.”
1. To buy new business premises
Taking out a business loan, often in the form of a commercial mortgage, to fund expansion into new premises can make sense. You can access the loan at a reasonable interest rate as it will be secured against the property. It can also be repayable over a long period of time to allow you to spread the cost.
2. Boosting your credit rating
Now, this can be a shrewd move. If you have your eyes on taking out a larger loan sometime in the future, borrowing a small amount now and repaying it exactly as agreed can boost your credit rating, helping you achieve better terms on the larger loan when the time comes.
3. To finance an unmissable business opportunity
If you are presented with an opportunity to fulfil a major order, taking out a Business loan to achieve this can make sense providing the income from the order more than pays for the cost of borrowing. Try and secure the order before you take out the finance, however, to minimise risk.
4. To fund equipment needed for growth
If your business is going from strength to strength and you are having trouble keeping up with demand, borrowing cash to fund the purchase of equipment that allows you to ramp up production can be a smart decision.
5. To fulfil part of a carefully considered strategy for growth
Consciously investing in growth is an essential part of making a small business successful and taking out a business loan can be a way to go about this – providing, that is, that you have conducted your business loan research and the decision to do so has been carefully thought out and agreed upon by the management team.