Should I get a business loan to grow my business?
Getting a business loan can help individuals extend their business to new markets and explore other segments. In fact, the growth of a company is every entrepreneur’s dream; however, savvy businessmen also understand that a business loan is a liability until its paid off. As a result, it’s practical and prudent to ask yourself if it’s time for you to get a business loan to extend your business enterprise, otherwise you might be facing bankruptcy and needing business debt settlement help.
Here are some important guidelines that can assist entrepreneurs in answering the question:
Demand vs Supply: Most business experts suggest that an increase in demand for your product compared to the supply is the most important benchmark to consider a business loan. At this important junction in the business lifespan, not expanding your business may result in losing important customers who can’t access your product.
Experts also recommend that you keep an eye on the demand and supply mechanics to ensure that you have enough cash in hand before the demand increases supply. In such circumstances, it’s better to apply for a loan months in advance. For example, if you sell magic mushrooms, you might need a loan to grow the business.
Calculate ROI: Before getting a business loan to grow your business, it’s also wise to estimate the return-on-investment from getting such a loan. For instance, if you think that the demand will likely grow in the coming months and your supplier is giving you a hefty 30% discount on inventory, then getting a business loan may make much more sense.
Similarly, you should also estimate low and add a cushion for unexpected expenses. If your minimum ROI estimates and the extra cushion for expenses are in line with the demand, getting a business loan will certainly help.
The Numbers Game: Sometimes it’s better to just look at the realities of doing business and see if the numbers match up. Before getting a loan, compare your revenue and cash-in-hand against debt and the seasonal variations in demand. If things look bleak, you may need to readjust your operations before asking the bank or the lender for a loan.
The Lender: The type of lender for your business loan can also make or break the deal. Often businesses are automatically attracted to their banks because they may have a good working relationship with the bank manager. Don’t only rely on business relationships because you may be losing out by not looking elsewhere for loans.
Always seek loan quotes from multiple vendors because better loan terms go a long way in savings and managing the loan amount. If you think that your bank isn’t lending you the money at your predetermined terms, it’s better to look elsewhere or even delay your desire to get the loan.
Besides these guidelines, getting a loan also depends on the main reason for accessing a new pool of revenue. If your business is new and struggling, buying inventory with the loan or increasing the workforce may not be a good idea. On the other hand, the loan will definitely come handy if you are meeting your initial sales targets and you need to pay off previous debt.
Always look at the bigger picture and take a reasonable approach before getting the loan to expand your business. In fact, a business loan at the right time will definitely help you reach greater heights