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Oct 2015

When to Get a Business Loan

October 29, 2015
Capify Australia

A business should never be static.  It has be agile enough to undergo changes to keep up with demands of a dynamic industry. It should also be able to respond to trends and seize the opportunity arising from it.   It is for these reasons that business owners should always have money to invest in new equipment  or personnel that will improve products, services and operations.

The time will come when you’ll have to expand your operations, especially for growing businesses, but if you do not have the budget for it, company growth could hit a snag. This is where small business loans come in. They will give you extra cash to meet your business needs without emptying out your business’ cash account. Here are the scenarios in which a loan is typically secured:

1. The business needs to expand

So your business is doing well.  Your profits are going up but just like everything else, it won’t last forever.  Eventually, it’ll plateau and then your profits will get smaller and smaller. Why? Maybe you didn’t even have enough people to cover your growing clients. Or you didn’t have enough new equipment to process business demands  faster. The solution is  to expand your business.

This, however, involves costs for renovations, new infrastructure, advertising, product development, and manpower, among others. To cover these new investments, you may want to secure a loan. A business may be liquid, but if the budgets for other plans will  be compromised, sustaining growth could be a problem. A loan gives your company a quick fix for immediate purchases. This way, your company can focus on earning more income rather than the expenditures.

2. Inventory is running low

Running out of  inventory or the products that your business sells is one of the worst things that can happen. Every second that a product is unavailable means you are missing out on sales and ultimately, profit. This is why you need to secure your inventory and make sure that you are always fully stocked, especially during peak seasons – when the demand is significantly higher.  

The challenge here is that you need money to fill your shelves before you can generate profit. Getting a loan for your inventory will allow you to replenish your products in time to serve a rush of customers and prepare for a sudden increase in sales or customer inquiries. This will help you secure enough money to settle employee benefits  and take advantage of the increased demand.

For instance, the Christmas season always brings a high influx of shoppers, as people have more income and will want to buy presents for their loved ones and spend for their Christmas parties. With a loan, you can prepare for this influx early on and spend for Christmas promos, which can possibly attract even more customers.

3. Equipment needs replacing

Machines, computers, or any other business equipment must always be in good condition. Old equipment should be replaced with new ones.  Businesses need to do this so it won’t  affect the production and operation of your business. An old computer or machine may lower your workers’ productivity and prolong order processing needlessly.  

However, buying equipment can be costly, especially the more advanced or complex models.   Some business owners would rather  settle for their old equipment in spite of the clear advantages of owning new ones.. When your business is being hampered by old equipment, securing a loan  will help. The added funding can help an organisation modernise facilities, thereby increasing efficiency and the potential to earn more profits.  With new equipment, you can even  provide a better experience for your customers.

4. Poor or no Credit history

Sometimes it pays to start small. If you just started your business, chances are you don’t have a glowing credit history.  It’ll be hard to get big loans.  Having poor or no credit history, quite frankly, isn’t the end of the world; it’s more of a challenge.

One solution to that particular conundrum is getting smaller loans and paying them back promptly.  Doing so will  can improve your credit history, which lenders often check prior to approval.

So, if you are planning to build a new office or buy new equipment, you might as well take a small loan that you can easily pay back. Every time you pay back those loans on time, it’ll improve your  credit rating, There are alternative lenders that are willing to provide loans and help you in this aspect.

5. Have a Steadier Cash Flow

Eventually, your business will face a road bump. These will be  moments when profits will be  low and customers do not pay on time. There may be unsold inventory that you will be forced to discard to create room for new products. Fortunately, these challenges can be addressed by getting a loan. A short-term funding scheme will significantly help your business weather the storm until things get better and sales start picking up again.

Furthermore, the added capital from the loan can help you improve your products and services. You can use it to fund your R&D team to create new  studies and solutions. It can also give your business  the capacity to hire the services of a reputable ad or digital marketing agency to create sound campaigns that can drive sales. In a nutshell, expenses can easily be settled using the loan, while the upcoming improvements bring more than enough profits to  pay the lender. It’s a win-win situation.


Helpful Reminders

A business is a journey  and to make the trip as smooth as possible, you’ll need help, whether it is sound advice or financial assistance. While it is understandable for some businesses owners to be worried about getting a loan, there are steps you can do to make the process easier. You can prepare all your financial documents and possible collaterals to can convince lenders to give you money.

Another thing to keep in mind is to be open about the story of your business. Many lenders hesitate to approve a loan because the applicants don’t want to tell why they need the money in the first place. Don’t hesitate to state your case that to the lender; it won’t really affect the image of your business, since there are confidentiality clauses anyway.

Plus, a well-explained and documented application gives off a good impression, which can pave the way for bigger loans in the future. Alternative lenders, like Capify, are willing to lend you an ear and a sum of money, especially when the proverbial chips are down.


Or call 1300 760 930 to speak with one of our friendly Lending Consultants now.

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