Signs Your Business Needs a Loan

A growing business needs resources to scale. Even if your business has strong financials, you may need outside funding for inventory, hiring, additional marketing, or even to refinance debt.

The decision to apply for a small business loan is an important one. We’ve outlined some of the top reasons that entrepreneurs reach out for funding and how it can help. Consulting with a financial expert is a good idea so you can ask for the right funding at the right time. Here are some things to consider when you’re ready to grow.

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You need working capital

Working capital is the common measure of a bar’s overall health. Calculating working capital is simple: deduct current liabilities from current assets. If your current assets do not exceed your current liabilities, your business likely needs additional working capital.

Business owners should make sure to have enough working capital in the bank to meet financial obligations and cover day-to-day expenses. That is why it is important to apply for a loan that allows you to use the funds for working capital.

You need more equipment

Whether you are manufacturing a product or creating information, there always seems to be more equipment to buy. From computers to copiers, expensive coffee machines to vehicles, the sudden need to purchase some new equipment to replace something old, or simply to improve efficiency, can come up at any time. When it does, getting a business loan can be a great way to finance major purchases.

You need additional inventory

You can’t sell what you don’t have in stock. And while having a waiting list could make it seem like your product is in high demand, it could also give people the opportunity to shop somewhere else. It is important to always have enough product on hand, or the materials to make those products.

You need a new or additional location

Whether it is expanding your current location or adding a new location, sufficient capital is required. Expanding your existing location might mean renting the building next door or adding additional space. It might mean simply buying more shelving and having more product and diversity in store, or you might need to move to a different location that is larger or better located.

You found a lower interest rate

Sometimes getting a business loan is just about keeping expenses down. If you have existing business loans it can be a good use of your time to occasionally look around to see if you can get a better interest rate on those debts. Just a single interest percentage point might  save you thousands of dollars each year – money that you can reinvest in the business to grow it more. When considering interest rates, you may find that rather than a new loan it makes sense to get cash for future payments on a structured settlement that you hold. In many cases, particularly for a fledgling business, it might cost less money to sell your structured settlement payments to fund business growth than it would cost you to pay interest on a loan.


Your business needs fresh talent

For many businesses, payroll is the biggest expense, but despite how much it costs it’s a necessary expense. While investing in talent will bring in money over the long run, it can be a large expense in the short term, particularly the cost of training. A business loan can be a good way to fund payroll expenses, including hiring and training.

Build business credit for the future

At some point in time almost every business needs to borrow money. Thus, it makes sense to start building credit in the name of the business now so that you can get a good rate on credit in the future.

An unforeseen emergency comes up

There are also surprise emergencies that may come up. When this happens, and your company doesn’t have enough cash on hand to manage it, a business loan may help.

As you work to grow your business, be sure to always have a cash reserve on hand because you never know when something will come up and you will need some quick cash.

You need a financial cushion

Part of your business planning strategies should be keeping a money reserve as a cushion. Some suggest having at least 6 months of operating expenses in the bank. Additional reasons to have a cash cushion is to take advantage of opportunities that arise. For example, if you can buy inventory at a lower price than usual, you can use your reserves.

Small business lending resources

SmartBiz® specializes in Small Business Loans. Our financial professionals work hard to get entrepreneurs the right financing at the right time. Here are some articles to review that outline the most popular funding options:

To get the best rates and longest terms, pay attention to your credit score. Learn why this is important here: How to Improve Your Business Credit Score and Personal Credit Scores: Important When Seeking a Small Business Loan.

WHAT YOU NEED TO KNOW:  The SmartBiz ® Small Business Blog and other related communications from SmartBiz Loans ® are intended to provide general information on relevant topics for managing small businesses. Be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed. Please consult legal and financial processionals for further information.