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Expert Answers to Biz Questions

Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.

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When Is the Best Time to Take Out a Business Loan?

 

Having sufficient cash flow is important in ensuring that your small business operates smoothly. If you’ve already started a business and are experiencing hard times, you should consider applying for a business loan. If your business has been successfully operating for a few years or if you have a strong credit history, you shouldn’t have challenges getting a loan.

On the other hand, new businesses and entrepreneurs without a strong history should consider applying for instant e-transfer payday loans to fund their business operations. Below are the best times to take a small business loan.

1.  When Starting a New Business

You should consider applying for a business loan before launching your new business. However, startup business loans need a stellar project report highlighting the potential profits to assure lenders of loan repayment. New entrepreneurs with excellent business ideas can use business loans to convert their idea into an earning venture.

Even then, entrepreneurs should ensure that the overhead costs of their business aren’t high to minimize their effect on expected profitability. Nonetheless, you should think twice and find an alternative source of capital before applying for a loan for your new business.

2.  During Peak Season

Most businesses have peak seasons, where the demand for products and services dramatically surges. Peak seasons include summer and spring for landscapers, the holiday season for retailers, and tax season for tax accountants. You can easily identify the peak season if your business has been operational for a while.

Businesses generate a lot of revenue during this period. You should consider applying for a business loan to ensure that you have sufficient cash flow and can easily afford expenses and operational costs.

For instance, accounting businesses can consider getting a loan to pay off additional contract employees hired during the tax season. Landscaping business owners also need some capital to buy new or additional equipment to provide better services.

3.  The Holiday Season

Holidays are a hectic period for most business owners. To complete holiday sales, entrepreneurs should invest in their businesses to reach their target customers. Yu may need a business loan to:

  • Purchase inventory
  • Afford additional equipment
  • Run marketing campaigns
  • Hire seasonal employees

Without supplementary financing, most small business owners cannot afford these costs.

4. Expanding Operations of Your Small Business

You also need some capital to expand your business. Debt financing is excellent for funding assets and other equipment required to expand a business. Ideally, the cost of acquiring the loan should be lower than the cost of equity.

You shouldn’t hesitate to get a loan to upscale small business operations, increase production, open a new location, or enter a new market. Fortunately, being approved for a loan if you have a running business with financial records is easy. You can take financial advantage of your running business to create another profitable business.

Endnote

You may also need loans to repay other loans, manage cash flows, turn around a failing business, or buy additional equipment. However, most business loans require personal guarantees. Apply if you have the requisite guarantee, which could be a down payment or collateral.

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