It is easy to assume that having more ready cash is the answer to all business problems. In fact, this is exactly the mentality that has driven traditional lenders to more carefully scrutinize loan applicants, regardless of company size or credit history.
Yet there are certain legitimate signs that indicate your growing business is best served by applying for a business loan. Sometimes, it just isn’t possible to realize your full potential without a little capital “jump start.”
In this article, learn the key signs to watch for that signal your business could benefit from a loan.
Sign 1: You’ve received that “once in a lifetime” large order.
While it doesn’t happen often, there are times when that big break you’ve been hoping for arrives literally gift-wrapped on your doorstep.
In these cases, you may not have the financial means on hand to rise to the occasion, but passing it up could ensure you stay marooned in the minor leagues for some time to come.
This is a clear sign that the time is right to apply for a loan. You may need the loan for raw materials, equipment or even temporary contract workers to fulfill the order. But the best news is, the order itself can serve as a type of collateral with certain business funding programs, making it much more likely you will be quickly approved for your loan.
Sign 2: It is time to hire more “yous.”
When you first opened your business’s doors, it is quite likely you wore most or even all of the hats. You juggled and you struggled and you got very little sleep. But now your business has successfully weathered the startup storm and you are long overdue for a more specific job description.
The reason for this is simple: in your business, there is really only one “you.” In other words, no one else can do what you do. When it is clear you could be generating more profit for your own company by doing what only you can do, it is time to bring in some extra hands.
Of course, hiring help, whether in the form of contract, part-time or full-time staff, takes capital. This is another one of those key signs that the time is right to apply for a business loan.
Sign 3: You have your eyes on a bigger expansion.
As a newer, growing business, you may have all the potential in the world, but your credit history may not show that on paper. No matter how convincing your business plan looks on paper or how persuasive you are in person, many lenders today are still quite wary after the 2008 financial meltdown.
If you can’t show them proof in the form of a solid credit history that you can pay back the loan, you are unlikely to get the loan. In order to build your credit history, however, you need to take out a loan.
So here is where you can start small, taking out smaller loans and paying them back on time, building a credit history that will someday net you that big capital loan to expand and fulfill your long-term goals.
Sign 4: You have reached your limit in terms of self-financing.
Self-financing can definitely get your startup business over some initial hurdles when it is too young to earn the trust of anyone besides you.
But in time, as Entrepreneur points out, self-financing can not only become stressful but also limiting. It can also negatively impact your business’s ability to build sufficient credit history (see Sign 3 here) to apply for bigger expansion loans in the future.
If you have reached the end of your capacity in self-funding your company, this is a clear sign it is time to seek a loan.
Sign 5: You need equipment or materials you don’t have to grow.
Finally, there are those concrete moments in a business’s life when you just need to expand…or risk staying put forever.
When you come up against a concrete need like this, only one thing will do: it is time to apply for a business loan.