Most business owners think that the best time to apply for a business loan is when there is financial need. However, some of the best times to apply is when you are expanding, expecting a rush, or needing to cover expenses for a slow season. When applying for a business loan, it is best to be as prepared as you can. Below we will explain common situations in which your business can reap benefits of a business loan and how to get started.
Expanding your business
If it is time to expand your business, a small business loan can help. Perhaps your physical space is getting too graded and you need to upgrade to a bigger space. You can also use it to help you upgrade your equipment and even add new hires to your staff. Adding new hires to your business can help your business improve its productivity and efficiency.
Need cash flow
It is common for businesses to have different ebbs and flows in their business during seasons. Sometimes businesses can have slow seasons and irregular cash flow, so a cash flow cushion is needed. With a business loan, you will not have to worry if this is the case and you have a cash flow shortage. Having a cash cushion can help you cover any unexpected expenses, avoid having to cut prices to move inventory, and much more.
Building business credit history
The most important factor in having a good business credit history is the fact that you can receive a loan with a good rate and with good terms. Traditional lenders might not be willing to give you the financing you need if you do not have a strong record. Applying for a business credit card can help you begin building business credit. If you make your payments on time, this will help your credit. You will also avoid any fees and interest charges by paying on time.
If you do not have a strong record, traditional lenders may not be wiling to give you the financing you need. Applying for a business credit card can help you begin building business credit as long as you make timely payments each month. Making your payments on time also benefits you because it helps you avoid interest charges.
To take advantage of opportunities
There will be times when your business will be presented with great opportunities that will require some cash flow. Some of these will be too good to pass up and a business loan can help you get the cash flow you need.
To introduce a new product or service
If your business is ready to introduce a new product or service, you may need to take out a loan to help you cover the costs. If successful, the sales of your product or service can help you pay back that loan.
When to Avoid Taking Out a Loan
Qualifications for a Small Business Loan
Once you have decided if it is right for you to apply, consider the following requirements to help you qualify.
The Bottom Line
Timing matters when you are applying for a small business loan. Be sure to do your research and shop around to compare the options available before deciding which one is right for you.