In business, as a rule of thumb, you have to spend money to make money. However, the problem is that managing all the costs associated with running a business can get tricky.
It’s not always possible to pay upfront for meeting your business financial needs until your business sees a substantial growth – but to see that growth you need to invest first. It’s a vicious cycle.
Then how can you invest in your business while keeping your cash flow intact to meet your operational costs? The solution may be a small business loan or a personal loan for business. While it is quite understandable to be apprehensive about taking on debt, but a loan can actually help you invest in your business to get better ROI without you eating into your cash flow.
Reasons Why Your Business Might Need a Loan
- Expand Your Business
One of the most obvious reasons you may be considering a loan is to invest in an expansion opportunity for your business. Expanding your already booming business ensures that your business continually grows and brings in profits without plateauing it.
Obviously, further growth means more costs on activities such as hiring staff, advertising, acquiring a new office property or renovating it, etc. Although absolutely essential, you may not have the money to cover these costs without digging into your business operational funds. But, taking money from your business account means disrupting the cash flow, which you should not be doing if your plan is to grow. So, loans are a great help here without eating into your cash flow.
- Purchase Inventory
Maintaining inventory is a big cost. Depending on the demand of your products, you have to continually invest in stocking up or replenishing your inventory. It then becomes increasingly difficult to maintain the inventory if you are not making enough profits. In such a situation, a loan can help you meet customer demands without hurting your cash flow.
- Improve Cash Flow
In business, cash flow is always a challenge, especially when you have unsold inventory or when you have customers who don’t pay on time. A short-term loan can solve the problem and help your business sustain and thrive when profits are low.
- Buy Equipment
You need to invest in equipment that’s necessary to run your business. Equipment is expensive and it gets easily outdated or it wears down. Unexpected repairs may break your budget, but you must repair it because not fixing it is not an option.
Loans can help you cover the cost of repair or buying new equipment so that you provide a better customer experience.
Benefits of Getting a Loan for Business
- Multiple Loan Options
You have a plethora of options in the type of loans and also in the type of lenders.
You can choose to get a personal loan for business, a business loan or other forms of credit that are easily available for business owners.
- Freedom in Decision-Making Without Sharing Profits
Most investors like VCs and angels give you funds in exchange for equity in your business or a right to influence the decision-making and share your profits. Banks and other lending platforms do not have a say in your business operations, do not ask for a share of your profits nor they interfere in how you manage your business. All they need is you repaying their debt on time.
- Affordable Rate of Interest
What is particularly advantageous about getting a loan in the current economy is that interest rates are unbelievably low right. NBFCs and banks offer loans for business at competitive interest rates. Some alternative finance options like fintech offer loans with nominal processing fees too. You can save a substantial amount of money on interest and on the overall borrowing cost.
- Flexible Loan Tenure
You can choose a loan tenor you are comfortable with. Generally, you can comfortably repay the borrowed amount within 2 to 5 years.
- Convenient Repayment Options
The best thing about these loans is the repayment options. You can work out your own repayment plan on the basis of your financial capability and business efficacy. You can also select a repayment amount you can afford to ensure you can pay back with ease. Also, you can use easy modes of payments.
- Boost Business Creditability
Getting small loans for business is an efficient way of building and enhancing your business credibility. As you repay your loan on time, you exhibit an exemplary financial responsibility, which boosts your credit rating and enhances the chances of easily availing large-scale financing in future, if the business needs it.
In today’s ever-changing business dynamics and fluxing economic climate, loans for business is a viable option for small business owners to obtain cash to grow their companies. However, the key is to use the additional capital wisely.