If you’ve been running your small business for a while, you know that taking on another debt could be risky for the success of your business. If you take out a loan and then revenue drops off, it could spell disaster.
The issue is knowing when. Be aware that if you’re operating perpetually in the red, another loan won’t help. Peter Comisar advocates cutting back on expenses and paying off your debts instead. Take a long, hard look at your expenses and see where you can eliminate waste and then use that saved money to pay off what you owe.
But other times, getting a loan might be the way to build an even more successful business. Here are some times when you might need one.
More Elbow Room or Inventory
If investing in a larger building or upgraded equipment can help you bring in more business, that additional income will help pay off your loan. In that case, taking out a loan might be a great way to expand your business.
The same goes for additional staff. If you’re overworked to the point that you’re losing business, a loan to enable you to hire more people will mean increased sales and greater income for you.
Banks tend to loan money to those who are most likely to pay it back. If your business is doing well, now could be the time to make those expansions before they become a dire need. During the times that you’re making sufficient money, your chances of getting that loan are good.
Banks look at your credit rating to determine whether you’re a safe investment, but if you don’t have credit, they can’t make a fair determination should the time come when you truly need financing. Consider taking out a small loan you know you can repay and pay it off quickly. It will do wonders for your credit rating.
Opportunity To Grow
Sometimes those rare opportunities appear that could be a boon for your business, and if you don’t move quickly, they’ll be gone. Maybe a bigger building in your neighborhood is for sale at a great price. It’s during these times that taking a loan will be a great opportunity for business.
While it’s not always a good idea to go into debt, there are times when a loan may be just the thing for your business to grow and thrive.