Small businesses take out loans with the hope of using borrowed capital to become more profitable. Loans can come from different sources and small businesses can use inventory or accounts receivable as collateral.
Depending on where and how the loan originates, borrowing money can be dangerously expensive, as interest and fees are associated with virtually every loan. Businesses can and should calculate the amount of total interest that will be paid over the course of a loan before accepting one.
Below are four reasons for taking out a business loan can be worth the risk.
1. To Increase Working Capital
Working capital is the money used to manage day-to-day business operations. Small businesses may take out a loan to satisfy operational costs until their earnings reach a certain volume. If the debtor has good credit and a solid business plan, a lender can offer short-term money for a business to get off the ground and grow.
2. To Expand Operations.
Expansion generally happens if a business is turning a profit, has a rising cash flow, and has positive forecasting numbers for the future. This is a scenario that makes a loan likely be acceptable for a small business.
3. To Purchase Equipment
Small businesses have two choices with regard to the acquisition of equipment: they can buy it, or they can lease. The equipment can also be sold for salvage value when it’s outdated or no longer functional. A cost-benefit analysis is necessary to determine whether it’s better to buy or lease equipment for a given company.
4. To Purchase Inventory.
Sometimes short-term loans, repaid within a year, are given to small businesses that have developed a trustworthy relationship with a lender. Making payments on time and holding a positive balance in a checking or savings account are both ways to build trust with a lender. Some small businesses are seasonal in nature, such as retail, hospitality, and agricultural businesses. If a company makes most of its sales during the holiday season, it can take out a short-term loan to purchase most of its inventory in advance. Loans to purchase inventory are generally short-term in nature; companies strategize around repaying them once the season is over, using proceeds from their seasonal revenue.
Our goal at GladePay is clear: get money into your hands quickly to help you grow your business. We want to eliminate paperwork and lengthy application processes so you could get the funds you need as soon as the next business day.
Please, fill the GladePay loan survey form to help us understand your need to access loans from us and grow your business.