Small business loans are powerful tools. When utilized responsibly, they can provide the resources needed to launch a business operation, improve an existing one, or expand the business so that it can reach more customers. Along the way, that small business loan can help the company stay in the black. Here are a few of the ways that the loan will save the company money over the long haul.
Starting Up Without Investors
Conventional wisdom dictates that entrepreneurs don’t use their own resources to start up a new business venture. While there are times when that does make sense, there are other times when the founder wants to maintain complete control. Keeping control is more difficult when there are investors who expect answers and who want to have some say in how the company operates.
Many people are surprised to learn that a solid credit rating and a strong business plan is often all it takes to secure a small business loan. Provided the amount is sufficient to get the company through that first year of operation, and the founder already has resources on hand to make the monthly loan payments, there is no reason to cede any control to other parties.
Upgrading Machinery and Equipment
The small business started out with refurbished equipment that served the operation well for several years. Now the time has come to think about upgrades. Rather than attempting to fund those upgrades using the revenue stream or dipping into whatever reserves the company has, why not secure a small business loan? In the best case scenario, the new equipment will increase productivity and reduce expenses. That will be more than enough to cover the total cost of the loan. In the meantime, there are plenty of resources on hand to resolve any unanticipated events that the company experiences.
Providing Funding for a Growth Phase
The small business is firmly established and generating a respectable amount of collected revenue each month. While that’s great, there isn’t a lot left after all the bills are paid. That means money to expand the venture or to allocate to product development is not there.
Choosing to secure a small business loan is the solution. The loan proceeds can be banked in an interest bearing account, and used when and as necessary to fund the growth project. That makes it possible to manage those additional expenses without relying on the cash flow. Assuming there is enough after taking care of the usual and standard expenses to cover the loan payments, the company will remain financially secure.
Taking Advantage of an Upswing in the Market
There’s reason to believe that the demand for the company’s products is about to increase significantly. That means the business owner needs to be able to meet that demand without risking the loss of current customers. Using a small business loan to secure more raw materials and pay employees to work overtime is a great way to build up the inventory and be ready for that upswing. In many cases, the increased business volume will more than cover the loan costs, and may even allow the owner to settle the debt ahead of time.
Steering the Course During a Slow Season
Not all types of businesses operate in markets where demand is more or less consistent throughout the year. If the small business is part of an industry that tends to thrive during a couple of quarters each year and then lags the rest of the time, there must be a way to get through those slow seasons. A small business loan will make it easier to ensure there is always money on hand to keep the operation on an even keel.
Using the loan proceeds, the business owner can take care of all essential expenses without having to deal with late fees and penalties. Once the slow season is over and business is booming again, it’s possible to retire the remainder of the loan early. That saves more money by reducing the amount of interest paid over the life of the loan.
Take the time to consider what a small business loan would do for your operation today. Think in terms of a specific goal and identify exactly how the money would be used. Having a properly designed plan of action ensures that you will get the greatest benefit from the use of this financial resource.