You may assume that only cash-strapped companies need loans. That would be wrong because companies need business loans for myriad reasons.
In a PayPal survey, 70% of the respondents said the pandemic shifted their perception of loans preserving struggling companies.
A business loan could be the difference between staying afloat and going out of business, so we examine how to get a business loan to boost your company.
How Can a Business Loan Help Your Company Grow and Succeed
a) Realizing Expansion Goals
Expanding a business entails moving to new areas, renting more office space, and producing new products to acquire new customers and grow profits. A credit line can help fund these projects.
b) Setting an Emergency Fund
A business requires cash to cover financial emergencies. In the absence of cash reserves, your best bet of surviving a financial crisis lies with small business loans. If building an emergency fund is currently out of reach, create one using business loans.
c) Purchasing Inventory
Unfortunately, a business lull comes before boom seasons, so you might not have the finances to acquire stock for the windfall. Obtaining a credit line will help purchase inventory just in time for the high seasons, which you can quickly pay off.
d) Maintaining Stable Cash Flow
Seasonal lulls affect cash flows. A loan will help stabilize the dips in revenue to help purchase new stock, pay salaries, and fund investment plans.
e) Protecting Your Business
Stable cash flows mean you can meet all your financial obligations, which places your business on a sound footing. You will have the means to protect your business from creditors who threaten to derail your plans.
What Are the Benefits of a Business Loan to Finance Your Company Operations or Expansion Plan
1. Maintaining Control
There are many ways to finance a business, such as family, friends, and venture capitalists. Unfortunately, some of them entail giving up a stake in your company to the lender/investor. The great thing about small business loans is you will retain full ownership of the company.
2. Improving Credit Score
When starting a business, acquiring a sizeable line of credit from banks and other financial institutions can be challenging. That’s partly to do with your low credit score and scant credit history, which is off-putting to lenders.
However, acquiring small loans is within reach. The trick is to keep securing and paying off small business loans, which will beef up your credit score over time. A high credit score will increase the chances of credit approval and favorable interest rates in the future.
3. Growing Your Business
Opening new outlets, producing new products, and upgrading technology require substantial amounts that you may not adequately fund using savings. A business loan will help cover the upfront costs, ensuring quicker profitable growth.
4. Large Amounts of Money Offered
Unlike other forms of financing like personal loans and funding from family and friends, you can acquire large sums when going the business loan route.
How Do You Go About Getting a Business Loan and What Requirements Do You Need to Qualify For Financing
i) Business Plan
A business plan is a map of the company’s next steps after acquiring the loan. The program shows your finances and goals, which go a long way in determining the amount advanced and repayment terms.
ii) Financial Statements
To determine your ability to repay the loan, the bank will require you to furnish the following documents:
- Profit and loss statements
- Bank account balances
- Income statements
- Balance sheets
- Accounts receivables
iii) Credit History
Lenders will conduct a credit check to determine your personal and business credit score. If your score is below the threshold, there’s little chance the lender will grant you funding. If necessary, it pays to check your credit score and raise them before applying.
iv) Collateral
If you have a poor credit score or history, you stand a better chance of securing one by providing collateral. Remember that lenders will only lend you an equivalent sum to collateral provided.
Final Thoughts
Business loans can make a massive difference to your business as they can help in expansion, producing new products, stabilizing cash flows, and building emergency funds. Visit the link in the introduction to learn about acquiring small business loans.
