5 Top Reasons to Get a Business Loan
Not yet convinced about getting a loan for your SME? Well, there are vast too many reasons why you may be confused about taking out loans. Seeking advice from others about it can get you more confused due to a myriad of opinions. From the cautionary anecdotes to the general naysayers, almost everyone you approach for advice will have to say why you should get a loan for your venture. But the truth is, not getting a loan can set your business back in several ways. However, getting a loan in itself is not an end, but only a means to an end. Taking a loan for the wrong reason can spell doom for your business venture, and even crash everything you’ve built. As such, you must conduct your diligence before applying for a business loan. Here are FIVE top reasons to take out a loan for your business venture:
- To expand your business
If you’re seeking to expand your business but have not enough capital to fund the expansion, then getting a loan is easily a great decision. But then, you shouldn’t just expand just for any sakes. The expansion should only occur if the business is turning a profit, has increased cash flow, and has an attractive forecasting number for the future. If you do not have of these factors in place, then it’s uneconomical for you to either expand or take a loan.
- To acquire equipment
Many of the equipment you would need to enhance your business productivity may set you back into thousands of naira or even millions. Taking out a loan at such an instance can be the smart thing to do. However, be sure to carry out a cost-benefit analysis to evaluate if acquiring the equipment is necessary. The analysis can also provide you an insight into whether you should lease or outrightly purchase the equipment. Generally, equipment with zero salvage value is better leased than bought.
- To increase your inventory.
Your inventory is probably the most significant expense you will incur in your business. And as a small business, it may be difficult for you to keep up with replenishing your inventory as at when due with the right quality and quantity. Thus, securing a loan to acquire more inventory would be a smart financial move.
- To improve your creditworthiness
It is quietly understandable that most lenders would prefer lending out larger loans to a business that has a verifiable history of loan repayment. This explains why you may only qualify for smaller loans when you’re just starting out your business or applying for a loan the first time. Getting a smaller loan and being persistent in your payments will help build your venture’s creditworthiness for the future. It may also help you foster relationships with a particular lender, giving you the connection to leverage on when you’re prepared for that bigger loans. However, be cautious when doing this and only take a loan, you can afford to pay back.
- To take advantage of a business opportunity.
Occasionally, you may be faced with business opportunities that seem too good to pass up. Such an opportunity may even be your chance to put your business in the limelight finally. It may be a chance to order inventory in bulk at discounted prices or secure a retail space situated at a perfect location for an unbelievable cost. In such situations, getting a loan to augment whatever amount you already have to fund the opportunity may be financially wise. But make sure you evaluate the potential return on such investment by comparing the cost of the loan with the additional revenue the investment will generate for you over time. If the potential returns on investment are higher than the loan, then don’t hesitate to go for the loan!
At KiaKia, we offer you real-time access to personal and small business loans that can help you fund whatever agenda you have for your business agenda at unbeatable interest rates.