5 Smart Reasons to Take Out a Small Business Loan

Business loans are a tried and tested way of acquiring money to fund a business. You can approach your local bank or apply for small business loans from online providers. But before you take this step, it is sensible to consider why you need the money. After all, borrowing money is never cost-free and if you fail to repay the loan, you could lose everything you have worked so hard to achieve.

Here are some reasons why taking out a business loan is beneficial.

To Fund Business Expansion

Are you ready to take your business to the next level? Has your e-commerce store outgrown its online roots and you are now keen to open a bricks and mortar store? Have you spotted a new gap in the market you can exploit? Whatever the reason, it is likely that you will need extra money to fund this process. However, don’t rush in without doing the math. Make sure that revenue forecasts exceed the cost of borrowing the extra cash.

To Purchase New Inventory

There may well be times when you need a cash injection to pay for extra inventory. Perhaps the holiday season is fast approaching, and you have identified a new product that is a sure-fire winner for your customers. Or maybe you are running low on a product, but you have some outstanding debtors and cash flow is poor. A short-term business loan will tide you over and help you purchase new inventory while demand is strong.

To Relocate to a New Location

Most businesses need to relocate at some point. If your business has outgrown its humble beginnings and there isn’t room to swing a cat since you hired new employees, it is time to relocate. It might also be worth relocating if you need to cut your overheads and move to a more cost-effective location. Either way, a small business loan could help pay the costs of relocating to a new place. Just make sure you research the new location to ensure it is a good fit for your business.

To Solve a Cash-Flow Crisis

Cash flow keeps a business alive. Without sufficient funds coming into the business, it won’t be long before you can’t pay your creditors or staff. No business owner wants to be in the position of robbing Peter to pay Paul, but sometimes circumstances conspire to make life difficult. If you don’t address a cash flow crisis, it could spell doom for your business. Don’t let this happen to you. Keep a watchful eye on cash flow and if things are looking a bit tight, ease the situation with a business loan to keep everything ticking over.

To Purchase New Equipment

As a business expands, it often needs to invest in new equipment. You may also need to upgrade older equipment when it reaches the end of its natural life. A business loan can cover the cost of these purchases.

Always check your financial situation before applying for a business loan. Most lenders will want to see detailed cash flow projections to make sure you can afford the repayments before they hand over any money.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.