Securing Funds for Your Small Business: 8 Scenarios Where Getting a Loan Is the Smart Thing to Do
As a business owner, you’re undoubtedly going to find yourself in a situation that calls for a loan sooner or later. Since every business is different, the decision whether to proceed with it or not should always be evaluated on a case-per-case basis. In many cases this is a good way to reach a new milestone in your entrepreneurial career and make the breakthrough you’ve always been dreaming of.Click To Tweet
To make the decision easier, here are 8 realistic scenarios where securing funds is the smart thing to do:
1. When you need new equipment
If getting a certain type of equipment will let you accomplish a task faster and more efficiently then the investment you make in the beginning will pay for itself anyway. Whether it be machinery, software, tools, or any other sort of equipment, do keep in mind that you’re going to need to familiarize yourself with it before you can expect to see any spectacular results.
Going down this route, however, requires some careful consideration on your part. Do you really need the device that you’re going to purchase or is it simply something that is going to improve the place aesthetically or make things slightly more convenient? As an example, investing in a coffee machine for your employees is sure to improve their mood to a certain degree, but is it really urgently needed to grow your business? In other words, as long as you know how to differentiate between needs and wants, then you will know if it’s the right time to invest in it.
2. When you’re in need of fresh talent
As your business grows, you’re probably not going to be able to take care of everything on your own any longer. Keeping up with a constant increase in workload may become harder and harder as time goes on. Hiring a fresh pair of hands could truly be the one thing you need in order to move things forward. Unfortunately, that won’t be possible without having the means to pay for their work, which is sometimes only made possible by applying for a loan.
If you’ve calculated that it’s going to help increase your bottom line then getting a loan is a suitable course of action. As long as your credit score is in order and you’re able to make your payments on time, getting an unsecured loan is definitely worth considering. Additional information is available by visiting www.unsecuredfinanceaustralia.com.au/, where you’ll also learn all about the differences between secured and unsecured loans. To keep it short and to the point, compared to secured loan variants, the latter type of loan doesn’t require a collateral, so you won’t be putting your business assets at risk.
3. When you’re going to need larger-scale financing in the future
Starting with a smaller loan instead of a bigger one could actually improve your credit score, and your odds of being approved. Smaller businesses typically have a hard time qualifying for bigger loans, at least without having a good credit history. It might seem without a point, but taking a smaller loan in the present will actually pave the way for a much bigger one in the future.
Furthermore, this strategy will also help you a lot when it comes to establishing a good relationship with a particular lender. Once you’re ready to apply for a larger loan, you can expect to be treated well when you return. Avoid making the mistake of taking on a larger loan that you won’t pay for on time. It’s imperative that you take this as seriously as possible and make timely payment. Missing a payment could ruin your credit and your chances of getting approved for a larger loan down the road.
4. When you need to purchase more inventory
Purchasing inventory is one of the biggest expenses when it comes to being in business. Replenishing your inventory on a regular basis is crucial for fulfilling orders. When starting out it’s often better to smart with smaller inventory to see how well it sells. When you reach a certain milestone in your entrepreneurial career, you will need a larger inventory in order to keep up with your the demand for your products.
But, what do you do when you know you’re going to make sales, yet you can’t seem to find the funds to purchase more inventory? You’ve guessed it, applying for a loan would be the the ultimate choice. As long as you based your decision your previous sales results, you’re essentially making a calculated risk which is going to work out in your favor the vast majority of the time.
5. When you’re expanding your operations
If your product sales are amazing, and your small office is no longer an option, then you may be ready to move to a larger warehouse. When you’re seeing this kind of success, expanding your business would be the move. The great news is that expanding will be a far less risky move compared to starting a new business from scratch.
So, you’ve determined that expanding is the next step to your business’ growth but how are you going to finance it? The up-front costs are nothing to jest about when making such a significant step forward, so you need an instrument to measure the revenue you’re going to be earning when you open up a new location. If getting a loan justifies the move and makes your operations profitable, then it’s a green light for you to be daring.
6. When a new business opportunity is on the horizon
Opportunities come and go, but one thing is for certain; you have a limited time to act. When you know that seizing the opportunity to acquire a smaller competitor will truly help you grow your business, you should not hesitate to grab it by the horns.
Ask any entrepreneur, and the answer will always be the same; there are no guarantees in life, much less so in business. There’s only time and decisions. Sometimes, trusting your gut feeling is the only compass you really need. Especially if the calculations you’ve made support the decision to move things forward.
7. When you need to offset a temporary cost
If you’re selling any type of seasonal goods then this should sound very much familiar. During a very particular time in the year, the orders come flying in and there’s an insatiable demand for your goods. However, the rest of the year might be very much stale and dry. Expanding your inventory during that time is a rational move, because you know it’s going to pay off when the right season comes. But until then, there are bills to pay.
Even if you come up with a way to keep your seasonal goods to a minimum, it’s going to be next to impossible to completely reduce them to zero. Getting a loan is a great solution to this problem. Simply because you know it’s going to pay dividends if you manage to stay in business long enough to reach the profitable season.
8. When you’re developing a new product or solution
Launching a new product blindly will get you nowhere. You could easily spend a good couple of years developing and polishing it, only to find out there’s no market for it in the first place. So is all product development a game of luck? Yes and no, there’s a method that makes things much more predictable, though you’ll still have to take a leap of faith.
The answer is market research. Simply do your due diligence and discover what people are buying in today’s marketplace, then come up with something similar yourself. Don’t be a mere copycat. It’s much better to create something original, especially if it’s better or cheaper than the product you’re trying to mimic. If you need to get a loan to make your idea a reality, then so be it. Since you’ve already made the conclusion that something similar to what you’re trying to create is selling like hot cakes, this should be a much less risky decision.
If you’ve stuck around to the end of this article then you now know enough to be able to make a rational decision whether getting a loan is the right move for you. No matter what you do, never let the fear of failure cloud your judgement. As a wise man once said, not taking any risks is perhaps the biggest risk you can take.