5 Best Reasons To Get A Business Loan

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A finger pointing on the button of a business loan which represents 5 reasons to get business loans

5 Best Reasons To Get A Business Loan

Business loans are given to companies to finance projects and kick-start new ventures. Credit is often a good strategy to initiate operations and grow. Indeed, getting a business loan is a common financial method for companies who want to engage in activities that are supposed to generate positive returns in the future.

Of course, business loans come with an associated cost—which is the interest rate applicable to it. That is why you should apply for a loan only when there is a good reason to do so. If you are not sure that your motivation is solid, we suggest taking another look at your plans and ideas as a way to find a less costly strategy to get them up and running. Will this loan significantly change your business for better or worse? How quickly can you pay it off? These are all questions you should ask yourself before considering going into debt as a viable option.

Let us help you in making that decision by taking a look at 5 good reasons to get a business loan:

Reason #1: You Need to build credit history for the future:

If your business doesn’t have credit history, it is an excellent idea to start building its credit. This will facilitate the task of asking for a business loan in the future, when you will probably need it the most. Obviously, you should start with something small and manageable, so you can learn the basics of borrowing money, along with its ups and downs.

This way, you will be able to always pay on time, which will help you in creating a solid credit history that will portray you as an excellent borrower. Getting a small business loan will also provide you with a financial relationship with a lender that could be really valuable when you aim for large-scale financing.

Reason #2: Your current assets are limiting your growth potential:

Depending on the particular activity your company has developed, you can require more or fewer assets to operate and grow.

Businesses that are capital-intensive are those in which the activity is heavily dependent on capital assets, such is the case with machinery or vehicles. If you find that you’re losing out on new clients because your equipment is already being fully exploited, such as, if all of your production lines are working 24/7, you should consider getting a loan to purchase more equipment that will allow you to expand.

In this case, if you were to get a business loan, you would have the ability to purchase the additional assets required to increase your production volume that will expand your capacity to fulfill that existing demand.

Nevertheless, be cautious about any investment decision made through loans. Not all assets are investments that should be acquired through credit. The new acquisition should guarantee growth and enough profits to justify and repay the loan timely. For example, new expensive machinery that would pay for itself in five years should not be financed with a 2-year loan, as the cash flow coming from it will not be sufficient to cover the installments in a timely manner.

 

Reason #3: Your business requires additional space to operate:

If the volume of products or services that your company provides has grown and you now lack the space to serve your customers or to store the goods, it’s time to consider expanding. Many companies study this possibility by either establishing additional stores or facilities in order to reach a larger customer base.

If you don’t have the money to finance the physical expansion, you should apply for a business loan if the project contributes to the overall growth of your revenue and profits.

We recommend that you carefully evaluate the appropriate amount of money to ask for because you have to make sure that the expansion will provide positive results over the long-term.

Any additional investment or expense must be more than compensated by those additional inflows.

 

Reason #4: You need additional inventory:

Most businesses deal with some kind of inventory. It can either be physical goods that you sell directly to your clients or it could be other types of products that are associated with the service you deliver.

Keeping up with the demand is not always easy because your cash availability is often dependent on your cash cycle. If your company is not in a position to make large purchases but you see an unserved portion of demand out there, using the resources coming from a business loan can help you reach those potential customers.

If your business operates seasonally and you have to stock up when sales are not common enough to justify the increase, you should consider a loan only if you know you’ll make your money back within the loan. Under such scenarios, getting a business loan is usually a good call.

 

Reason #5: You want to take advantage of an incredible opportunity:

 If you have found a very attractive business opportunity and you think it would be a waste to miss it, but you don’t have enough financial resources to complete the deal, a loan may be a good option.

An example of this might be a contract that will be allocated to your firm, but you have to spend a lot of money on expensive equipment before the project starts providing income. Obviously, you must forecast all your expected revenues and costs, including the interest rate of the loan in order to guarantee that getting a business loan would be a good idea.

Despite the specific details of the business loan, you have to be aware that going into debt can be costly if lenders evaluate your company as a high-risk entity. In general, interest rates and down payments increase for borrowers with poor or non-existent credit history. In this sense, we highly recommend that you build a solid credit history before you apply for a large business loan.

If you have an urgent need for funds but a poor credit history, you can contact us at CorporateCashCredit.com where we will help your business increase credibility with lenders by improving your business’s paydex score which will eventually lead to approval for funding.

During the 45-day process of obtaining your 80 Paydex Score on Dun & Bradstreet, we help you make 4 or more credit payments to put toward building your score. We will help you make charges and then pay those charges off before the due dates. Once your Paydex reaches a score of 80, we will start the funding process through several rounds of financing that will be carried out through our network of allied lenders who are standing by to approve you for funding our network of allied lenders.

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