When to Take Out a Loan for Your Business

Adequate financing, it can easily be said, is the backbone of every successful business. As reported by Fed Small Business, 43% of small businesses applied for a loan in 2023. The motivation for financing is clear when considering that 82% of small businesses fail due to cash flow problems. Getting a loan for your business is smart, given that successful businesses secure financing before they need it to thrive and grow.

Reasons to Get a Business Loan 

Smart business owners borrow money because they can build credit by paying back their loans and lines of credit on time. Borrowing helps improve cash flow, and it can fuel growth. Loans can help a business ride out slow periods. 

Specific reasons to get a loan for your business include starting a business, fueling business expansion, upgrading or buying additional equipment, purchasing inventory, paying off or consolidating existing debt, financing a business acquisition, funding a marketing campaign or boosting marketing efforts, and covering unexpected expenses. Fueling growth can include things like hiring new employees or upgrading the human talent pool, purchasing additional property, and launching new products or services.

When to Take Out a Loan for Your Business 

Here are 9 great times to take out a loan for your business: 

1. To prepare for your business’s busy season. You don’t want to be “flat-footed” when your busy season arrives. So, prepare in advance to handle all the volume you can get by taking out a loan for your business that will enable you to hire extra staff, purchase additional inventory, or buy other assets to increase business capacity. 
2. When you need additional equipment or technology that can help your business move to the next level of performance. 
3. When you really need extra space. 
4. When growth can be strongly influenced by strategic new hires. 
5. When you need to build credit for future borrowing when it will be needed. Credit is built as smaller loans are taken out and repaid promptly to demonstrate effective financial management. 
6. When you want to make some major changes in your business. That can include major marketing initiatives, expanding into new markets, introducing new products, and developing new services.  
7. To provide a financial cushion for the off-season. 
8. When your business is mature enough and financially sound enough to secure a great loan at an affordable rate.  
9. To seize a great business opportunity.

When Not to Take Out a Loan for Your Business 

Waiting until it is too late to pay your employees or when you can’t pay your operating expenses is the absolute wrong timing. Don’t take out a loan for your business if you can’t afford the monthly payments. Don’t take out a loan for an amount that is more than you need.  

How To Get a Business Loan 

First, decide what type of business financing you need. Those can include SBA loans, traditional short or long-term loans, lines of credit, working capital loans, equipment financing, and alternative financing. Second, determine your eligibility, Third, compare small business lenders. Fourth, gather the required documents. Fifth, apply for financing.

Seek Professional Business Coaching Assistance 

Not sure what your home service business’s next steps should be? Contact Blue Diamond Consultants for professional coaching services to take your business to the next level. Our coaching services are based on extensive experience through previous success for home service provider businesses.