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How To Know When To Take Out a Business Loan

How To Know When To Take Out a Business Loan

The decision to take a loan is a tough one for anyone running a small business. After having struggled to a place of stability, the prospect of going into debt can be a daunting one. What many business owners do not understand is that debt itself is not a bad thing. It is a major aspect of business and should be looked upon as utilizing a resource (money) to expand business operations. True, you have to pay for it, in terms of interest, but that is the cost of doing business. It is really no different from the electricity you use in your office. You need power to work, but at the end of the month, you have to pay for it. Similarly, you need funds to grow your business, and you pay for it. Getting a loan is not a very hard endeavour with many firms offering business loans at an optimum rate. For example, if you are residing in Singapore, you have to use search options like “business loan Singapore” to get various loan options, and you can decide the one that suits your need. But what is critical is to know when to take out a loan. Every business is different and has different growth opportunities and challenges. That being said, there are a few basic and common situations where taking out a loan makes sense.

You Need More Space/Equipment/People

A business cannot remain static – to survive it needs to grow. That growth calls for resources that the business does not have itself. That means taking out a loan. Taking out a loan to finance growth is always a good idea. Since the objective is increased turnover and income, repaying the loan should not be a big burden.

You Need A Financial Cushion

Many businesses are seasonal and suffer through slow months when there is a reduced workload and income. When overheads and expenses exceed income, the natural inclination is to cut costs by laying off staff and try to lift turnover by cutting prices. The problem with that is that when business picks up, getting back the experienced people that were laid off is not going to be easy. Additionally, the market will resist an increase over the discounted off-season prices. Getting a loan to help you get through a lean period without resorting to drastic measures will help to avoid these problems. Just be sure that repaying it during the peak season is viable.

A Great Business Opportunity Just Came Up

A great business opportunity just landed in your lap and you need to grab it with both hands. However, you need to scale up operations to succeed in making the most of it. That requires funds you may not have. If you are sure you and your business can meet the challenge, a business loan will provide you with the resources you need to make the most of the opportunity.

You Do Not Need Money

This may sound odd, but look for business loans when you do not need them. If your business is established and stable, you may be eligible for low rate loans. Once you know that financing is available and how much it will cost you, you can start looking at growth opportunities that may not be viable with the high cost of financing you were offered in the past.

Knowing when to take out a business loan is a key factor in growth. A CPA or firm specializing in financial consultancy for small businesses will be able to evaluate your needs and guide you to the right financing resources. A good business directory will provide you with the information you need to get in touch with the experts who can help you.

  • Feb 22, 2019

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LocalBizNetwork, LLC was formed in 1999 to help small business owners with Online Solutions. The company has grown into a global small business organization from its humble Silicon Valley roots. LocalBizNetwork, LLC has partnered with various small business organizations throughout the world to build a marketing platform that will help the business owner become more visible in the online world.

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