Today we take a closer look at a question as old as trade itself: When is the right time to take out a business loan? Keep reading to discover the answer.
When Is the Right Time to Take Out a Business Loan?
Conventional wisdom has an answer to the question in the title. The best time to take out a business loan, they say, is when you don’t need one.
No doubt, this is a sensible piece of advice. After all, if you don’t need a loan, that means that you are more than able to repay one without straining your finances or wreaking havoc on your credit.
The thing is that, as we’ll see in the next section, real-life circumstances are not always so clear-cut.
When It Makes Sense to Take Out a Business Loan
Let’s review some scenarios where a business loan makes sense for your organization.
There’s a simple rule to determine whether borrowing money makes sense for your business. All you have to do is ask yourself, “Are these funds going to help increase the value of my business in a substantial way?”
You must ponder this question carefully in order to avoid getting sidetracked by wishful thinking. Don’t sugarcoat it. Don’t see things through rose-tinted glasses. If a loan can substantially (note the emphasis) increase the value of your business, then it may be a good idea.
If, on the other hand, the answer is “maybe,” then you probably have to take a step back and ask yourself if your business really needs that money.
Some valid (and common) reasons to take out a business loan include the following:
- Working capital
- Purchase inventory
- Purchase equipment
- Purchase commercial real estate
- Upgrade existing facilities
If you are considering taking out a business loan, SBA loans are a great alternative. They have less strict requirements compared to bank loans and usually feature longer repayment terms.
The two most popular SBA loan programs are 504 loans and 7(a) loans. Generally speaking, 504 loans are used to purchased large fixed assets such as machinery or real estate, while 7(a) loans can be used for long- and short-term working capital, to purchase furniture, or to get supplies.
Gellyfish: Certainty of Execution in Business Loans
Looking for a business loan in California, or anywhere in the United States? Gellyfish is here to help. We offer financing solutions with the certainty of execution you need to take your business to the next level.
We are located in Riverside, and work with clients all over California and beyond. Contact us today by email (firstname.lastname@example.org), telephone (877-800-4493), or social media (Facebook, Twitter, LinkedIn), to schedule a free consultation or to learn more about our full range of financing options.