Many top strategy consulting firms will tell you that getting loans can be a good thing for small businesses, especially for those that want to fast-track their growth and achieve their growth as quickly as possible. However, this is only applicable when the loans are used the right way. Otherwise, they can lead to financial problems down the road and may even pave the way to the downfall of your business.
If you own a small business, you’ll want to get a loan if you’re dealing with the following situations:
Purchase additional or more modern equipment
Equipment leasing is often the go-to for many small businesses since it requires low up-front costs, putting it within easy reach of companies with minimal cash on hand. However, while leasing equipment might be affordable, it can actually prevent you from enjoying the tax benefits that come with owning your business equipment outright, which means that you’re losing out on significant savings.
To ensure that you can access these savings, consider buying your equipment instead of leasing it. You can always take out a loan to afford the upfront cost of purchasing business equipment. Just make sure to run the numbers before completing the purchase so you’ll know if the new equipment will help increase your revenue and allow you to create profits that are higher than the cost of the loan. A strategic planning consultant will be able to help you make the right decision.
Purchase more inventory
If you have received a large order but don’t have enough products on hand to fulfill it, you’ll want to take out a business loan. This way, you can grab the opportunity not just to sell more products and create more revenue but also to make a lasting impression on your customers and perhaps even turn them into loyal clients.
Manage gaps in your cash flow
Business cash flow refers to how money flows in and out of your business, with customer payments considered as incoming cash flow and bills and invoices considered as outgoing cash flow. In the ideal world, your business would have a positive cash flow (meaning you have more money coming in than going out), but this isn’t always the case. Customers might send in their payments several days after the deadline, or you might have to cover an emergency expense that wasn’t factored into your business budget. Cash flow issues can become more apparent if you have a seasonal business since your bills will stay consistent throughout the year but your earnings will fluctuate. The good news is that getting loans can cover the gaps in your cash flow and help your business stay afloat even during leaner months.
Build your business’s credit
Having strong credit is important not just for individuals but also for businesses. By improving the credit history of your small business, you’ll become more likely to be approved for bigger loans in the future, which can make it much easier to achieve your long-term business goals and make your company grow. Simply ensure that your loan payments are settled on time and that you can meet the lender’s terms and conditions, and you can build a solid credit history for your small business and secure its financial future.
Expand your business
Having the option to expand is a good sign that your business is on the right track. However, most expansion efforts (such as hiring more employees, renting a bigger office, or opening a new branch) will require a substantial amount of money. Applying for a loan will help you cover the costs of your expansion projects and grow your business without putting a lot of strain on your finances.
Getting the right loan can help you achieve your business goals and get several steps closer to long-term success. If you’d like to get more advice on business growth, reach out to Profit Solutions. We offer professional accounting and bookkeeping services as well as tax preparation solutions, and we can help you create the ideal budget for your business, identify any issues with your cash flow, reduce your debts and liabilities, and achieve other goals. Get in touch with our experts now! Contact us at (877) 875 0910 or email us at email@example.com.