Business loans can play a key role in the lifecycle of a business. Here are three key moments in the life of a business when business loans can make all the difference.
1. When Your Business Must Move Quickly
Fast-emerging opportunities rarely offer entrepreneurs the time needed to line up investors or go through a lengthy appraisal-valuation process for financing. Establishing a business line of credit ahead of time can give your business leverage to take advantage of emerging opportunities when they present themselves, so that you don’t have to stand on the sidelines and watch competitors gain ground simply because you didn’t have the working capital to get in the game.
Your business may also need to move quickly when unexpected expenses arise. If your business has working capital “standing by” in the form of a business line of credit, it can draw on that line to purchase or repair failed equipment or make facility repairs on short notice, ensuring minimal disruption to your business and continuation of service to your customers.
A business line of credit is perhaps one of the most flexible business financing tools. It makes working capital available to a business immediately, on demand, yet the business is neither obligated to draw on or charged fees on the line of credit unless it needs to use the money. For this reason, it can be an ideal financing choice for businesses who need to have access to capital on short notice.
2. When Your Brand Reputation Is On the Line
If employees, vendors or customers fear that your business cannot meet its financial obligations, your brand reputation could be damaged. Short term business loans act as a financial bridge, ensuring that a business can continue to pay its vendors on time during cyclical or unanticipated periods of low cash flow.
Likewise, payroll loans give a business the ability to meet a payroll cycle when cash flow is low, ensuring that employees will continue to have confidence in their employer. Since customers make judgements about the brands they prefer based on how they perceive employees are treated, this can even help to protect a brand’s reputation.
Both short term business loans and payroll loans are repaid to the lender in a short period of time. Not only does this help a business reduce debt quickly, it can even help to improve its credit score as underwriters see that the business is generating the revenue needed to repay its financial obligations.
3. When the Walls of Your Business Are Closing In
When the walls of a business are closing in, it is time to grow! Businesses that want to expand their customer base by attracting new segments of their target markets may desire to add new goods and services. Inventory loans can be used to finance the purchase of goods needed to expand inventory or stock up in advance of the busy season.
Equipment financing can be used to purchase the equipment and furnishings needed to offer new services to customers. Since new goods and services are likely to help the business attract new segments of its target markets and grow its customer base, the additional revenue generated can be used to repay financing quickly and make the company more profitable.
When a company is ready to expand square footage or add new locations, business loans can be used to fund expansion so that reserves of working capital do not need to be depleted. With an expanded customer base and new lines of revenue, the cost of financing could be quickly erased and the business could find itself in a position to grow even more quickly in the future.
Working capital is vital for the growth of any business, and most organizations will need to seek financing at some point during the lifecycle of their company. Exploring your options ahead of time could help ensure that your company has the right type of financing ready when opportunities to grow arise.
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