When it is Reasonable to take out a Business Loan?

Telling everyone that you are applying for a business loan is like opening a can of worms. This will attract all kinds of opinions and everyone will tell you gruesome stories of what may happen if you push through with such notion.

While not every reason is a good one to be in debt for business, this does not indicate that there’s no good reason at all to take out a business loan. If you are seeing that your business is all set to take it to another level but you do not have the capital to do so, then the following may make you reconsider getting legal funding for your business.

Braving New Locations

Does your secretary need to take up office space in your kitchen or your cubicles are now busting at the seams? Perhaps, you are running a retail store or a restaurant and you now have more customers than what it can handle. With regards to this matter, it is safe to say that you are in dire need of new location. This is actually great news! Because this only means that your business is growing and that you are all set for expansion. But simply because your business is ready, it does not mean that you are financially ready as well to make it work.

As a result, you might want to take a loan in an effort to finance this major move you’re about to make. Whether it is adding location or moving and picking up, the upfront cost and the change of overhead is sure to be drastic.

But before you execute the initial steps in taking a loan, measure first the probable change in revenue that may come from space expansion. Could you still cover the cost of loan and generate profits? Take advantage of revenue forecast together with the existing balance sheet to see how such decision is going to impact your bottom line.

Establishing Your Credit in the Long Run

If you have plans of applying for a big-scale financing down the road, then the case could be made for starting with small and short term loans. This is extremely useful in building your business credit. Business startups usually have a difficult time to qualify for bigger loans if both the owner and business do not have firm credit history to show. Thus, taking out smaller loans and then regularly making payments on time is one way of building business credit for future financing.