Determining whether or not a small business loan is right for you depends upon the type of business financing you need. Today’s lending environment requires you to know exactly how a small business loan works and your available options. For example, you may want to expand your businesses location or you may need to purchase or lease additional equipment. You must clearly define to the bank the purpose of the small business loan and explain why it is a good reason for you to go into debt with them.
Not every reason is a good reason to take on additional debt for your small business. However, plenty of good reasons do exist, and if you plan out those reasons correctly, it will only help your bottom line. Here are some strategic and smart reasons for a small business loan.
Buying Additional Inventory
Inventory is one of the biggest headaches for many small business owners. Many entrepreneurs struggle with either too much or too little inventory to meet supply and demand. However, by using proper cost projections and available inventory compared to your previous year’s sales, you can identify holes in your inventory today and fill those holes with a small business loan in order to see returns on your inventory (ROI).
New Business Opportunities
In the world of small business, opportunities come and go. However, when new opportunities do arise, they are sometimes too good to pass up. Entrepreneurs who face these opportunities may not have the equipment to complete a new project, or buy needed inventory at a large discount with a small window to act on the discount. When these new business opportunities arise, you must thoroughly analyze whether the return outweighs the new debt incurred by a small business loan. If you perform an accurate revenue forecast based on the purchase of the new equipment to complete the project, or the discounted inventory increases sales, then a small business loan may be right for your business.