Running a business can be expensive and even the most profitable enterprise needs an injection of cash from time to time. However, getting finance for a business is very different to being approved for a personal loan as your individual credit history is far less important. Instead, you’ll need to demonstrate that the business can sustain the repayments and is a legitimate operation.
Another factor the lender will be interested in is your reason for taking out a business loan. While they may not be too keen on providing funds purely to prop up a failing business, there are many purposes they will be happy to support.
Business loans are regularly obtained by small, medium and large companies to help them with a range of expenses. Below you’ll find some ideas of what business loans are frequently used for.
Purchase of stock or inventory
If your business requires stock or inventory to operate, you’ll probably have cash in your business plan to keep things running smoothly. However there may be times when you need to purchase a large amount of stock in advance, such as during a seasonal peak, and a business loan can be an easy way to finance this.
When business is booming, you’ll undoubtedly be thinking of the next step. This may be buying more equipment or moving premises, both of which could be expensive. To save putting your business under financial strain, a business loan can help to fund the transition and help you to expand and grow.
Investment in employees
The most valuable commodity every business has is employees and so it’s essential that they’re properly taken care of. This may mean hiring extra people when required, preventing undue stress being placed on existing staff. At other times this may mean supporting them by offering training courses or opportunities to expand their skills. All of this costs money, which you may be able to cover without an injection of cash. However, if you don’t have available funds a business loan is a legitimate way to pay for this expense.
You may have taken out different business loans at various times and now have a number of monthly repayments to juggle. A single loan to consolidate your existing debt makes it easier to manage and could lower the monthly instalment. If the credit rating of your business has improved you may be able to get a new loan on better terms than you were offered before.
Marketing and advertising
Marketing your services is essential to attract new customers and keep up with the competition. Routine advertising and marketing can be managed on a budget but if you plan a big campaign that you hope will bring in a lot more business you may need more money. It’s a vicious circle: without more money you can’t advertise, and without that big campaign you can’t earn more money. A business loan can break that cycle, providing the necessary funds.
A step to success
For many businesses, loans are an integral part of their financial planning and help them to succeed. Finance allows businesses to invest and grow at a time when available cash flow may be low.
A lender will want to know the reason a business is applying for a loan and whether it can afford the repayments. You will usually have to provide a copy of your business plan and projected income, as well as trading accounts, so the lender can make an accurate assessment.
For more information about business loans or to apply, contact Loans Warehouse today on 01923 678 870.