As a businessperson, you likely are keen on managing risks and maintaining a steady flow of income. So, it’s only reasonable to want to find out whether it is a good idea to take a business loan, or not. Well, in an ideal world, you’d never really need a loan – but in the real world, you will encounter a range of responsibilities that will require you to have funds, which may not be at your disposal. In such cases, taking a loan can help you suffice the need.
We talked to one financial expert from Loanski, a leading Online Introducer in the UK, and this was his advice regarding when it’s okay to take a business loan:
Promotion and advertising
Clients do not come unless you shove your product on their faces. Many businesspeople consistently struggle to bring in new leads and customers after launching their business. Promotion and advertising is an essential step with potentially incredible returns and can help you build your name, establish your brand, and increase sales. If you have no resources to channel towards this function, then taking a quick loan can help you set things in motion.
Maintaining cash flow
If you are just getting started, you may find it hard to maintain steady cash flow, even with good forecasting and accounting, because of dry-spells and other unavoidable issues. Taking a loan can go a long way in helping you keep your business afloat when you find yourself in such a position.
Buying or fixing equipment
Equipment plays a critical role in your business operations. If yours is broken or out-dated and requires fixing, or if you need to invest in a new one but do not have cash at hand, then taking a loan may be a great idea. This is especially critical if your business relies on the equipment – because otherwise, it will translate to downtime, customer dissatisfaction among other issues.
Sourcing or stocking inventory
You will need stock in place before you can generate revenue. However, there are times when the demand becomes too high, and you need to replenish your inventory with plenty and high-quality options. This can be challenging when you need to buy large amounts of stock (like warm clothing for winter or swimsuits for summer), before getting a return on investment. It’s even tougher when yours is a seasonal business where slow seasons precede peak seasons. A loan may help you match your inventory with the demand.
Expanding your physical location
If you happen to outgrow your current office location, or if you have more clients than your initial location can fit, the next best thing to do is to expand your business. But this can come at a time when you do not have cash on hand to grow, necessitating the need for a loan.
Before you take any loan, spare some time to gauge the potential change in income that would arise from the credit. Analyse whether it is possible for you to pay back the loan and still enjoy some profits. Ideally, you want to know how your move will affect your bottom line before committing.