The goal of almost every business is to get bigger. That doesn’t necessarily mean chasing massive growth, but at the very least you will want to seize some strategic opportunities and invest in areas that will increase the bottom line.
In an ideal world, profits would be flowing so quickly and continuously that you wouldn’t ever have to worry about how to finance these plans. But in the real world, it often requires some external financing. There are many options and getting a small business loan is one of the most tried and true.
When should you pursue small business financing? As with most things in life, timing is everything. There are no hard rules, but for most people, the following five scenarios represent some of the best use cases for a small business loan.
Almost every company needs key equipment, tools, machinery, or other assets to improve operations. If you’re not innovating and increasing your efficiency, you’re losing ground to your competitors who are. No matter the industry, technology is probably something you will have to drop a big chunk of money into at one time or another. This may be hardware like computers or development for a new website or mobile app. When you need to make a big purchase, financing with a loan makes a ton of sense. You spread the cost out over time and all it costs is a little interest.
Increasing sales and revenue, at some point, will usually require more people. While you generally don’t want to take on debt to hire workers that won’t be sustainable to retain, a loan can help cover a short-term payroll spike when you staff up for seasonal work or offset one-time recruitment and training costs. This can be a great way to not deplete your reserves while staying committed on growth.
Whether you rent or buy, real estate will always be one of the most important decisions — and expenses — for any small business owner with a physical presence. If you want to move or add an additional location, this can be a great time to finance. Along with the new rent or mortgage, there will be extra costs to get up and running, so taking on a loan can help ease the burden of these immediate expenses.
If you need to stock up on inventory, a small business loan is often a great idea. This is particularly true of seasonal businesses. If you make a lot of your sales during the holidays or during another specific time of the year, the more you have in stock, the more you can hopefully sell. While debt can be daunting for some, the last thing you want to do is run out of a key item and end up missing out on big profits at a make-it-or-break-it time.
The final scenario is the worst one to be in. Sometimes, you hit a rough patch and are struggling to keep up. This is first and foremost a time to be honest with yourself and assess your situation. Is this a small bump in the road? Or is it a sign that your business model may have some cracks and you need to make some big decisions or cuts? If it’s the former and you want to protect your payroll or other key assets, including your cash reserves, a loan can be a good move in the short term.
These days, getting small business financing is easier than ever. The marketplace has never been so friendly and full of companies providing small business owners with products that are fast, secure, and offer flexible service.
When exactly is the right time to get a small business loan?
Well, the scenarios outlined here are definitely a great guideline. But chances are that, if you have some experience in your company and industry, you will already feel it in your gut.
And for many business owners, the best time is right now.