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6 Reasons Your Small Business Needs Financing

Posted by Daisy Watson | Comments Off on 6 Reasons Your Small Business Needs Financing

If you own a small business, you’ve probably considered financing at some point. After all, the appeal is undeniable: with the right financing option, you can fund your dreams and build the business you always wanted.

At the same time, you’ve probably also had reservations. What if it’s not the right time? What if you can’t repay the money?

Provided you have a business plan that includes a reality-based strategy for paying the money back, there’s no reason you shouldn’t seek financing.

In fact, with the right plan and assets to match, financing may be the very best thing you could do for yourself and for your business, as these 6 reasons show.

Reason 1): You Need to Build Capacity

If your business is taking in more customers than you can really handle at your current location, or with your current productive capacity, the solution is clearly to build capacity and expand.

This may take the form of relocating to a newer, larger facility. Alternatively, perhaps you can remain at your current location if you add productive assets.

Of course, as every business owner knows, merely needing to expand doesn’t mean you actually have the money saved up to do it. This is where financing can come in handy, particularly something like a term loan.

The great thing about this is that building capacity can help you generate the money to pay off the borrowed funds.

Reason 2): You Need to Build Credit

Even if you don’t think you need financing now, it might still be a good idea to get a smaller loan, with manageable terms for repayment, and pay it all off to boost your credit.

Strictly speaking, you may not need the loan, but if you take it and pay it off, you’ll build up credit against the day that you really need a large loan.

Business loans for bad credit can be an incredibly good idea if you use them to get better credit. Put simply, taking out a bad credit business loan may be worth your while now for the simple reason that it will boost your credit for later.

Viewed this way, the loan is actually a kind of investment.

This is also a good strategy for creating a longer-term relationship with a specific creditor if your plan is to apply for a larger loan from the same lender at some point.

Reason 3): You Need More Inventory

Many businesses in many different industries are affected by seasonal patterns of expansion and contraction, with periods of abundance – holiday seasons, peak tourism – following on the heels of very slow periods.

If you are in one of those industries, you may find it desirable to take out a loan to purchase more inventory ahead of the boom times, so that you can maximize your returns during the period of high commercial activity.

Provided the sales figures from previous years justify this move, getting financing to expand inventory can be a very good move if it enables you to sell that much more and increase your revenue.

Reason 4): You Need Talent

Your business may well start with you alone, a one-person operation, but at some point you’re going to need to expand your talent pool. Alternatively, you may start out with a small team, and find that at some point you need to turn it into a larger one.

Hiring people may or may not come cheap, depending on the positions you need filled and the number and kind of people you need to fill them. Depending on the situation, you may find financing a good way to make sure you have enough working capital up front.

Reason 5): You Need to Get Started

Some businesses require relatively little capital to get started, but most will probably require significant investments of some kinda facility, major productive assets, hiring employees – before they can open their doors and offer any production at all.

When you’re dealing with any version of this situation, you’re going to need financing to get off the ground and be effective. With the right financing options, you can get your business started and generating revenue that much faster.

Reason 6): You Need Money, Period

What all of the reasons we’ve discussed have in common is that they’re perfectly legitimate reasons to need financing to do more of what you love and make money doing it.

The practical reality is that in the entrepreneurial world, sometimes you have to chase a potential opportunity – a new facility, new productive assets, new talent – and to do that, you’ll often find yourself needing financing. With productive opportunities at hand, the right financing option is an investment in future success.

About Daisy Watson

Daisy is a writer who writes for many blogs on the internet. Writing is her passion, and she is enjoying her passion.