Startups, entrepreneurs, and small businesses always tend to take loans to serve various purposes. However, defining the most suitable time for such an action becomes challenging, especially for new entrepreneurs.
Moreover, it becomes difficult for entrepreneurs on benefits to need a loan today from a direct lender with the idea of a new business. Additionally, many organizations hold back the decisions in the hope of better interest rates or a suitable lender.
Also, the online and offline lending market continuously changes depending on the world scenario. Therefore, decisions for expansion, project funding, debt clearance, etc., become more difficult. However, there are five specific times the owners should take loans.
5 Best Times for Owners to Take Loans
● New Office
Working from home at no additional costs can become useful for self-driven entrepreneurs. However, if they want to expand and build more revenue streams, they should have space for meetings and discussions.
Additionally, entrepreneurs would require the in-house workforce to complete the daily tasks to focus on company growth goals. Therefore, the staff would need an adequate salary, equipment, and space. Hence, the costs increase with every new company employee.
Under such circumstances, entrepreneurs find partners or cofounders and move to a new office space. It is also true for solo company owners, as they also require board members. Moreover, a new office opens the door to new revenue streams with its visibility.
New business owners often work in a coworking space that lowers their monthly expenses and avoids settling with a property. Additionally, coworking offices help to grow businesses faster with lower monthly and yearly fees.
Under such instances, small business owners should opt for loans to cover costs.
● New Gear
All businesses require different types of equipment or gear. These include laptops, production machines, softwares, telephones, headphones, punching cards, etc. Moreover, flourishing businesses often require new materials to launch new products.
Often owners find it useful to buy products instead of leasing. Small business loans can help to entail ongoing costs of new company gear. Also, owners should know that it is advisable to conduct a cost-benefit analysis before replacing the old equipment.
Additionally, accommodating the depreciation value of the gear would prove useful to owners. Therefore, businesses can recover small business products and equipment costs through different loans.
● Stock Purchase
Company owners often buy stocks when they have the lowest prices. However, when a business faces financial problems, it requires selling them at lower prices to recover ongoing costs. Besides this, owners have to lower the company share price in the market to cover expenses.
However, taking small business or startup loans absolves owners of such issues. Moreover, businesses can opt to take an amount equivalent to the debt and start with the repayments. It will help recover from outstanding debt, make better utilization of profits, and help achieve goals.
Besides this, business owners can even purchase more stocks and resell them at their convenience. Therefore, business loans diminish the requirement of taking action on existing stocks.
● Growth
Entrepreneurs and small businesses have targets similar to larger organizations but at a lower scale. These include growth achievements like hiring, opening a new office, boosting sales, increasing products or services, etc.
Unfortunately, many startups and entrepreneurs fail to achieve these goals to its optimum due to the lack of financial freedom. However, small business loans eliminate this drawback and help to sustain growing company goals.
Taking a small business loan for growth also helps to rank higher in the community and the sector. Therefore, it helps to bring more viable angel investors and venture capitalists into the firm. As a result, the company flourishes despite the drawbacks associated with money borrowings.
● Boost in the Working Capital
Often small businesses, especially recently established, fail to recover the working capital for existing employees. It leads to bankruptcy, firing of employees, relocating an office, reducing office equipment, and other dramatic changes.
However, small business loans can help to avoid such circumstances by boosting the working capital. With the funding, business owners can sustain their ongoing expenses with regular repayments.
Business owners with a good credit history can better interest rates on loans when they fail to recover the working capital. Also, delaying a loan can lead to higher APRs, low availability of lenders, inconvenient durations, offering security, etc.
In addition to loans, small businesses can opt for debt consolidation, promotional credit cards, funds from friends, grants, competitions, etc. These can prove useful and viable solutions for owners with a bad credit history.
Furthermore, cofounders can avail of guarantor loans by supporting the repayment. A friend, family member, or a relative can also become a guarantor. Lenders might offer lower interest rates to a person with a good credit rating.
Owners must remember that they can avail themselves selves between £1000 to £500K as a small business loan. Alternatives to them include merchant cash advance, peer-to-peer lending, invoice financing, asset financing, crowdfunding, angel investor, and unsecured loans.
But owners that want a small business loan must have proof of three months of trading. Additionally, it is available for registered Ltd, LLP, and sole traders of the UK. Many lenders offer a quote for such a loan in forty-eight hours of online application submission with proofs.
