Depending on the current state of your business and your objectives, getting financing can be a great option. If you pitch the idea to people around you, some may caution you against this. But the truth is that most great businesses had to leverage debt at some point in order to grow.
However, there are many cases when debt can become a liability. This is why it’s important to reconsider your motives when thinking of getting a loan. Here are some examples of good reasons to get a loan for your small business.
You Need More Space
Maybe you’ve outgrown your current office space or own a retail space, but are getting much more traffic than you expected. In these cases, getting a loan might be a great idea. It will allow you to serve more clients, and will have a positive return. If you simply want to give your space a makeover however, think twice. Not only could this make little to no difference on your bottom line, but lenders are much less likely to approve for this kind of expense.
You’re Trying to Build Credit
If you’re trying to build your credit, getting an initial small loan could be a great option. Getting it now could allow you to get access to more financing in the future; as long as you respect the terms.
Getting a first loan might be a challenge, however, especially if your business is still new. But there are alternative lenders like Advanced Point Capital, for instance, that will look beyond your credit for additional indicators of your business’s health. This could be a great way to establish a positive credit history, and inject your business with some much-needed cash at the same time.
You Need Money for Inventory
This is another occasion where you might need to access some credit in one form or the other. Inventory is one of those things you can’t do without, so it’s perfectly understandable why a loan could be useful in this situation.
However, you might want to look at something else than a loan in situations like these. Maybe you could try invoice factoring. Invoice factoring allows you to borrow money against invoices that haven’t been paid yet. This will prevent you from getting stuck with having to make installment payments. But it will also give you immediate cash flow if you’re struggling to keep up with inventory for a few months.
You Need to Jump on an Opportunity
There are times when an opportunity might be worth the risk and outweigh your debt. For instance, you may have found a great space that is much cheaper than where you are, but don’t have the money yet, or want to capitalize on a deal on a specific inventory item or equipment. In these cases, you have to see if the return is greater than what you’re borrowing, and if it will benefit you in the long run.
All of these reasons are perfectly acceptable if you want to contract a loan. Always remember to keep your options open, and only consider opportunities that will eventually translate into profits for your business.