The world of business is an interesting place, where a seemingly successful business that is in the shop next door to you can be moments from financial ruin. So it comes as no surprise that the reason that people take out business loans are quite varied. Here’s some of the reasons people consider applying for a business loan.
Expansion Of Your Physical Premises
You’re busting at the seams, and the board room has become the office for the new guy. Does that sound familiar? It sounds like you’ve outgrown your current location. Or perhaps you have run out of space to cater to your customer’s needs because you’ve gotten so busy. All round, great news, and congratulations!
This doesn’t necessarily mean that you have the available cash to deal with your expansion. To lease an additional location there are so many financial considerations that could account for the need to take out a loan.
After years of relying on that ancient printer to do the job for you, it has finally done it’s last job for you. Whilst it may dwarf in comparison with the value of other loans, buying that new printer, a new piece of IT equipment or piece of machinery could generate huge performance and efficiency improvements for your team. Whilst it sounds great that having a high end coffee machine is in sight, it’s not adding value to your business, so be sure that your loan leads to a good investment.
Purchase Additional Inventory
To upsize a business and take it to the next level, you may need to purchase additional inventory. Whilst it may take a while to see the return on investment from taking out a loan, it is very valid that inventory replenishment is critical. Do your numbers, and ensure that there is a demand for the goods you are offering. You don’t want to be purchasing winter coats when the weather will be hot for the next 4 months!
New Business Opportunities
So you’ve found an awesome new business opportunity that falls into your lap that you simply can’t pass up. Perhaps you can buy a huge amount of inventory for a low cost. If the potential return on investment outweighs the debt, then go for it! You need to understand the true costs of taking on any new business opportunity though!
Sometimes you just need to add new blood to the team. You’ve been wearing too many hats for far too long, and you need to free yourself up to work on other part of the business, or you are just avoiding burnout. If you are trying to do too many things, it is almost inevitable that something will fall through the cracks, and quality will be compromised and your business may suffer for it.
Overall, you simply need to be confident in your ability to pay back any loan you take out, and every business decision involves an element of risk. Just be sure to your numbers and ensure that the risk is worth taking.