A lot of people are scared by the prospect of taking out a business loan. While it’s true that there are some risks when borrowing funds, the benefits can far outweigh the risks. You don’t need to be in financial trouble to take out a loan. It can be useful to help pay the bills, stock up for a busy season, invest in expanding or hire more workforce.
Build credit history
One of the positive aspects of applying for a business loan is that by getting into debt with a controlled credit, you’re actually building your credit score for the future. This means that by starting out with a small sum you can prove that your business is trustworthy. This will allow you to build a reputation for good behavior and will open up possibilities of even bigger loans in the future. Although the words “bigger loan” may not sound like music to your ears right now, when your business takes off and starts to grow, you’ll find that borrowing funds can be a blessing in disguise, instead of a hindrance.
There are many entrepreneurs who take the plunge and decide that a small loan is the way to go. This was the case for Caroline Taylor. With her experience and drive, she decided to start her own company called Taylor Made Diagnostics. Although she started with only a few thousand dollars, carefully utilizing her working capital allowed her to purchase the location she needed for her business to boom. This loan didn’t signify a daunting debt and the eventual downfall of her growing business. On the contrary, it boosted their image and capacity, taking them to where they are today.
If your credit score isn’t absolutely perfect, don’t worry! Today there are many more options available to for small businesses that don’t necessarily involve a traditional bank. These alternative companies offer flexible programs for loaning money, and are more lenient in terms of interest rates, early repayments and refinancing.
Always carefully evaluate if your business is ready to commit to a loan. You need to foresee your cash flow, revenue and possible expenses to make sure you will be able to pay back on time. Once you have taken all these things into consideration, and are confident that a loan will not be detrimental to your mid-term business plan, then you can start looking for a good financing option that will allow you to invest and give you breathing room to pay back.
Remember that the primary goal of taking out any business loan should be setting yourself up for success. Having said that, don’t be afraid to get creative with the ways you can invest your capital. Many companies offer advice on how to best invest to make sure that money goes a long way. Before approaching a financing company to borrow funds, make a small plan where you detail how much money you actually need, how you plan to use it and how your business is going to support the payments. It will give you more confidence when asking for the loan, and will allow the lender to see that you’re a responsible entrepreneur with real goals.
Choose the Right Lender
After making the decision to take out a loan, you have the task of choosing the right financial institution. Investigate every option thoroughly. Check out their interest rates, the terms of the loan and repayment conditions. If you have questions, don’t be afraid to ask them. It’s better to speak honestly about your fears and doubts at the beginning of the process, than after you’ve signed a contract you didn’t fully understand.
Don’t worry if your credit score isn’t perfect. Today there are many more options available to for small businesses that don’t necessarily involve a traditional bank. These alternative companies offer flexible programs for financing, and are more lenient in terms of interest rates, early repayments and refinancing.
Once you’re satisfied that you chose the best option in terms of financing, you should sit down with your representative and have them thoroughly explain the process. It’s a lot less daunting when there’s someone there to help you every step of the way. Be financially responsible and stick to your payment schedule.
A small business loan isn’t as scary as it sounds, and can actually help your business grow and expand. A well invested loan can allow you to hire new employees, expand your location, stock up for a busy season or buy new equipment to respond to the growing demands of your customers. All of these things will definitely influence your revenue growth and take your business to the next level.