5 Reasons Why a Loan Could Benefit Your Business
There comes a time in the startup cycle of every small business where they will need to take on credit to grow. When your business begins to expand, so do your expenses, and part of dealing with this new growth is learning how to handle the financial implications of it all.
Keeping your business operations running smoothly, managing your creditors and your inventory can become a financial juggle that is no longer possible without some financial assistance. Here are five advantages of taking a small business loan with smallbusinessloans.co to help you grow your business.
#1 Purchase Plant Equipment
Do you need to buy new computer equipment? Could you use a new machine to expand your operations? Micro loans can provide you with the capital you need to add to your plant and machinery without impacting your cash flow.
#2 Build Your Credit Profile
A new Small business has no credit profile. Therefore; seeking a loan from a large financial institution like a corporate bank will not be possible unless the owner offers a personal surety, or places collateral on the loan in case of default. The banks do this to cover their risk in the deal if the business defaults, the owner is then personally liable, and the collateral will be taken by the bank to cover the outstanding loan costs.
Micro lenders do not have these same financial requirements. They will gladly facilitate a loan to small businesses with no credit profile. You can use this opportunity to build your credit profile for larger financing deals with corporate banks in the future.
#3 Keep Sufficient Working Capital Available
Retailers need cash on hand to cover inventory purchases and supplier payments. There are times where a product may sell out, and new stock is required. However, vendors will not deliver the new product until you settle the previous outstanding account. If your money is tied up in inventory that isn’t selling, then a small business loan will give you the cash you need to cover your account and place a new order for the fast-selling stock.
#4 Solve Cash Flow Issues
Poor cash flow management is the death knell for small businesses. It’s stated to be the number one reason why over 80% of new businesses fail in the first year of operations. Avoid the cash flow pitfalls of slow paying clients and employee payroll issues. A small business loan will help you keep your head above water while your company expands and brings in more revenue.
#5 Cash On Hand for Growth Opportunities
New business opportunities may require having cash on hand to take advantage of them. Buying a cheap delivery truck for cash is a good example of an opportunity for the company to acquire an asset that produces income for the enterprise and increases profits.
Work with Professionals
Select your micro lender carefully. Fly-by-night agencies and predatory lenders look to take advantage of small businesses in tight financial spots. Choose to work with an ethical and industry reputable lender that meets all the necessary financial regulations and guidelines.
The Final Word
Always use debt responsibly. If your business is experiencing financial distress, then taking a loan will probably not be such a great idea, and the chances are that it won’t solve your problems. Never use debt to finance other debt, in this case, speak to your accountant and see if you can make a plan to navigate your way out of the crisis.