How to know when it’s time to take a loan out on your business

Need money to expand or help you through a tough time? Here are five reasons why you might want to take out a loan for your business.

There are times in business when a little extra cash is required. Perhaps you’re ready to expand? Need to cover temporary cash flow issues? Or maybe you need to hire extra staff to get you through a busy period?

Whatever the reason, you might need to look at business finance. To help you work out if that’s the right choice for you, here are five reasons why you might want to take out a loan for your business.

1) You want to expand the business

One of the main reasons to take out a loan for the business is if you’re looking to expand. There are usually many costs involved with expansion, so it’s a good idea to create a financial plan before you begin. 

In order to expand, you may need new premises, equipment and additional staff. You’ll also need to market the business after the expansion, plus cover operational costs until the new part of the company takes off. Ensuring you have enough to cover everything is essential if you want the expansion to be a success. 

2) You’ve run into cash flow issues

Even the most successful businesses can experience much slower times. The trouble is, when you’re just starting out or if you’re a new business, these quieter times can prove extremely damaging to your finances.

If you’re struggling to manage your cashflow to help you through these slower periods, a loan from a lender like Nucleus could potentially help. It enables you to still pay your supplies and fulfil customer orders when funds are limited.

3) Funding additional equipment

Each year, technology continues to improve. This means, equipment can quickly become outdated. In order to keep up with the competition and push the business forward, you need to ensure you’re investing in the latest technology.

However, the cost of new equipment isn’t cheap. If you don’t have a lot of spare cash, you’ll find it difficult to upgrade your equipment and machinery.

That’s where a loan can prove useful. It provides you with the temporary cash you need to invest in the best equipment. The efficiency, speed and cost-effective benefits you get from using the new equipment will make the cost of the loan more than worthwhile. 

4) Emergency funding

Ideally, every business should have an emergency fund. Whether it’s to cover temporary cash flow issues, or protect you against lost, stolen or damaged products; an emergency fund can really ease the pressure during times of need.

However, for many businesses they simply don’t have enough spare cash to save towards an emergency fund. If you don’t have a fund set up, a business loan could help you to cover the emergency with minimal stress. 

5) To build up your credit rating

Another reason you might want to take out a loan is to build up the credit rating of the business. This is especially a good idea for new and small business.

If your company doesn’t have a credit history, you may find it difficult to find investors or partners later on. You’ll also struggle to get certain types of funding without a solid credit rating in place.

When you take out a business loan, you’ll start to build up your company’s credit history. As you make the repayments, it will increase your credit score. Then, when your credit record is checked by investors or lenders later on, you’ll be seen as a responsible borrower. This will make it much easier to get the funding you need.

Need to take out a business loan?

These are just some of the main reasons you might want to take a business loan out. They can prove invaluable in many ways, particularly in emergency situations, or to give you the capital you need to expand your business and increase your profits.

So, if you’re looking to expand or get your business through a tough financial time, or want to grow it, why not look into the different types of loans available to you today?

Photo by Annie Spratt