3 Reasons to Apply for a Business Loan
Whether you're trying to get your new business up and running or looking to take the next step in your business' evolution, applying for a business loan is a great place to start. Business loans do not have one set and strict purpose, so it's possible to get approval for one that suits your needs. According to Entrepreneur Magazine, most businesses apply for a loan in order to grow, rather than for the capital needed to meet operating expenses. In fact, 56% of loan applications from small businesses are for the following three purposes: business expansion, acquiring assets, and the pursuit of a new opportunity.
If your small business is ready to make some moves in a new direction, let's take a look at how you can benefit from a business loan.
Physical Expansion
Perhaps you've been running your business from home, or maybe you've outgrown your current storefront. No matter what the reason, recognizing that it's time for your business to expand is an exciting part of entrepreneurship. If your business is thriving, that doesn't necessarily mean that you have an excess of capital to use for a new mortgage or downpayment on another location. This is the perfect opportunity to apply for a business loan.
Business loan services exist to help provide the capital for business owners to make purchases necessary for their operation. If you're consistently making a profit and ready to scale up or relocate your business, investing in property is the next step. It's unlikely that any business has the funds to go out and secure a new property without financial assistance, but, even if they do, having the authority of a loan on your side can improve your chances of getting the property you want.
What's more, relocating your business operation and/or inventory can have a lot of steps. You'll need to cover the cost of packing and moving. Plus, you may need to make some changes to your new space before opening, such as choosing new paint, installing floors, and purchasing furniture or displays. A business loan will help you to cover more than just the mortgage or payments of the actual space, the loan can help with renovations and staging before opening.
Acquiring Inventory
If you're just starting out or adding a new product to your catalog, a business loan can help with these types of acquisitions. The amount of inventory necessary for a business' grand opening can come with a steep price total, which is why having a business loan is a great way to get started. With a loan, you can use the funds to purchase large quantities of items to stock your shop or the materials necessary to create your goods.
Inventory is classified into a few main categories, but the most relevant to this expenditure are raw materials, finished goods, and operating supplies. A good example of an inventory subcategory is packaging and promotional materials. If you are opening a new shop or store, you're going to need branding, signage, and packing materials. This is all considered inventory. Additionally, you may need to buy the bare basics, like a register, computer, and even a security system.
Inventory includes more than just the items you keep in stock to sell to customers, it also includes the little things like toilet paper and brooms. Applying for a business loan will allow you to request an amount that reflects all of your needs. Having the capital for your business expenses means that you will be able to budget accordingly, and won't need to accrue debt on any personal accounts.
Diversification
If you already have a thriving business, you may not have considered business loan services any time recently. If you're making a consistent profit and successfully covering all of your overhead expenses, you may be wondering how a loan could be beneficial. Growing and evolving your business is necessary to stay relevant and successful in any industry, and diversifying your business is a great way to keep things fresh for customers and branch out into new markets. The risk with diversification is that you're trying something new and can't be certain that the new product or service will be successful. Thankfully, with a business loan, you can afford to take that risk.
Using a business loan to diversify your business is a smart way to take the chance on something new. Instead of risking your profits or jeopardizing your ability to cover operation costs, a loan will provide the funding for the new production, training, and inventory. Even if you have a thriving business, taking out a loan for any new expansion or venture is the only way to mitigate the risk of losing everything if things go wrong. When you use a loan to try a new service, bulk order a new product, or change up your business in any way, you have the loan terms to fall back on.
Hopefully, your diversification project is a success, but, if it's not, your existing business model can keep running without hemorrhaging funds to cover the losses. Instead, you'll be able to make your loan payments over time. Business loans are the smartest financial decision you can make for your business and employees if you have any intention of making large-scale changes, including an attempt to diversify.
Business loans are a tool that every business owner should know how to use effectively. If you have any misconceptions about loans and borrowing capital, understanding how to successfully implement funding from a loan will dispel those notions. A loan for your business should not mean that you're borrowing money to stay afloat. It certainly can mean that, but businesses who use their loans this way are more likely to fail entirely. Bailing your business out with a loan is not going to repair fundamental issues with your business model and operation.
Successfully utilizing a loan looks different for every business. It's important to note that loans for businesses are flexible and can be used for one or many purposes at once, so long as it's within the parameters of your loan terms. What's essential to success is that you have a plan, invest wisely, and perfect the fundamentals before trying to expand. Your business is like a building, and if you try to build too much, too fast, the structure will crumble. Knowing how to solidify your business' foundation is integral to future success.
Business loans are a powerful tool with infinite potential. The only limits to your success are the ones you place on yourself. If you're ready to take your business to the next level with a new location, new products, or anything else you can imagine, it's time to consider applying for a loan. We would love to be a part of your business' journey. Call us today to speak with one of our team members about how a business loan may be right for you. Capital Bank is a certified money lender and member of the Federal Deposit Insurance Corporation (FDIC). We offer fair and competitive interest rates, as well as both personal and business banking solutions.