A small business loan may be a
strategic move. Almost any business may need a loan at some point. At first,
this may sound negative. However, there are strategic reasons when your small
business should get a loan. Let’s discuss them.
1. To expand
operations –
If your business is booming, you may need to add space, people,
move to a larger physical location, and even add talent. In this case, a
business loan makes strategic sense. The opportunity to expand your business
and achieve greater profits outweighs servicing the debt.
2. To Purchase
Inventory –
If you have a sizable backlog of orders that you are unable to
fill because of limited inventory, this is another strategic reason for getting
a business loan. In fact, not doing so may damage your business in the form of
lost customers and poor cash flow. This is especially true of small businesses
that are seasonal in nature. If, for example, a business makes most of its
sales during the holiday season, it makes strategic sense to purchase most of
their inventory prior to the holiday season. The opportunity for a successful
holiday season outweighs servicing the debt.
3. To Purchase
Equipment –
You may need addition equipment to meet increased orders or to
expand your product offerings. If you need equipment to meet increased orders,
that suggests business is booming. Getting a loan ensures you will capitalize
on the opportunity to increase revenue and profit. Not purchasing the equipment
may allow a perceptive competitor to offer better delivery terms and shut you
out.
If you need to expand your product offering, this is potentially
another strategic reason to get a loan. Expanding your product offerings
potentially will make you more competitive, in the form of “one stop shopping,”
and provide additional sources of revenue.
From a tax viewpoint, getting a loan can be a savvy move. You can
take a significant tax write-off the first year and depreciate the rest of the
equipment over its economic life. In either case, the additional revenue and
tax write-offs associated with purchasing the equipment can outweigh servicing
the debt.
4. To Have
Working Capital –
Working capital is the money you need to run your business on a
day-to-day basis. Sometimes a business may have a significant contract that
will yield massive profits. However, the contract terms dictate payment in 90
days or even 120 days after the rendering the service or delivering the
product. Often, larger corporations dictate these types of payment terms to
small businesses. Put simply, big business is maximizing their cash flow at the
expense of the small business. Unfortunately, you still have to pay your
employees and other business expenses while you wait for their payment. One
answer is a short-term business loan. This strategy will take the stress out of
dealing with the payment terms of larger businesses.
5. To
Consolidate Debt –
Small businesses incur numerously debts requiring steep monthly
payments. If you find your business in a situation of servicing numerous
high-interest debts, consider consolidating those into a simple, transparent
monthly payment and free up cash flow to run your business.
6. To Pay
Business Income Tax –
Many small businesses file their taxes annually. Unfortunately,
they may have insufficient funds to cover their taxes. There are numerous ways
to deal with this situation. One way is to arrange for a small business loan.
This will remove the stress associated with dealing with the IRS and the
potential penalties they may impose. However, before you make any decisions,
you should consult with your attorney and accountant.
Often, when a small business needs a loan, time is critical.
Unfortunately, according to Forbes, you can “Expect to
get an answer within two to four weeks.” Other experts state that traditional
banks can take 60 to 90 days to approve a loan. This is likely not going to fit
your time constraints.
I have done significant research and found one company that
understands the financial time constraints of small businesses, namely Lending Club Business Loans. Whether you
need $5,000 or $300,000, they can help you in as little as a few days. Get your
loan with affordable fixed interest rates with 1 to 5 year terms.
Written By
Louis A. Del Monte
0 comments:
Post a Comment