Choosing to get a business loan isn’t a decision that should be embarked upon lightly. Plain and simple, you’re adding new debts to your business for an endeavor you can’t afford on your own, which is inherently risky behavior. However, a large proportion of business decisions are inherently risky. That’s why the entrepreneurial path isn’t for everybody. That’s not to say there aren’t good times and bad times to secure a loan, though. All of your ducks need to be in a row at this point, or this loan needs to help get you through a temporary rough patch. Those are just two quick reasons. Let’s get into some more complex ones:
You want to expand.
If everything is going great with your business, and you’ve been able to stabilize this success for a few months, so you fully understand the ups and downs involved, it might be a smart time to expand your business. Expansion comes in many forms, from an expanded product line-up to a second location, or even just an extension on your existing business. Hiring more qualified sales staff to close more deals is also a significant expansion technique if you’re in that kind of industry.
You need to modernize.
It’s unlikely you’ll find an example as extreme as the one we’re about to suggest. But then, if you were a farmer and everyone you knew had a tractor, it would be a prudent decision to upgrade from your donkey and cart. The differences are a lot less obvious in real life. Modern equipment is often costly, but you’ll be able to get back the money quickly in increased efficiency and productivity, assuming you make the right purchase. New and updated equipment should be prioritized, not upgrades for the sake of a new and shiny plaything.
You want more credit.
Sometimes, people take out loans that they don’t necessarily need just so they can pay them off. Why, exactly? It’s so they can build more credit for their business to make larger loans in the future. As long as you understand how much you’ll be paying in interest and can handle the hit, a small business loan is a fantastic way to demonstrate to creditors that your business can pay its dues.
Buying out the competition
When the timing is right, you might be able to secure a competitor at a much lower price than usual, which would further increase your market dominance. Taking out a loan to supplement your existing funds to be able to make a reasonable offer is a brilliant business move. You’ll be able to use the profits from the acquisition to pay down your loan. After a while, you’ll have your loan paid off and the entirety of the profits to yourself.
There are lots more great times to get a loan, but the general idea behind the timing of a business loan is more or less the same – acquiring resources now to boost your future resource acquiring power. It isn’t recommended to take out business loans to fund struggling endeavors or extremely risky ideas with a low possible payout. If something is going on in your line of work that absolutely needs to happen, but you lack funds on hand, that’s when you should be considered giving a creditor a call.
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