Business loans are not just for companies having cash troubles. When used right, loans are a strategic tool for businesses to expand, thrive and capitalise on growth opportunities. As a business owner, you may think you are financially responsible by staying away from business credit. But actually, you could be holding your business back!
Whether you’re an MSME, a start-up, or an MNC, timely funding is essential for the success of your business. Have a look at the top 10 signs that indicate it’s time to apply for a business loan.
#1: Booming Business
It may seem counterintuitive, but your business needs a capital infusion when it grows and generates higher revenues. As your business grows, you need to expand the scale of your operations to meet customer demands. You may have to move to a bigger office space or renovate your existing space. Since real estate costs are sky-high, you may have to take a small business term loan to acquire new office space. Think of this as taking a home loan to accommodate the needs of your growing family.
Similarly, if you find that your team is too small to match the scale of operations or are overworked to meet customer demands efficiently, then a small business loan can be used to fund workforce expansions.
#2: You Fail to Meet Customer Demands
Are your sales leads going untapped? Unable to deliver on all customer orders? Is your team taking a long time to fulfil customer requests and dispatch orders? If you answer yes to any of the above questions, it’s a good time to look for additional working capital.
You can use the loan funds to buy inventory, invest in bigger equipment, expand your facilities or hire more staff. Funding at the right time is critical to ensure the continued success of your business and to retain customers. The cost of finding new customers outweighs the cost of maintaining existing customers. Additionally, companies that nail the customer experience right grow faster than their competitors. So, it’s a good idea to take a loan to deliver an enhanced customer experience and fulfil all customer orders on time.
#3: You’re facing Cash Flow Challenges
Cash flow troubles are the biggest challenge for many small business owners. Even if you are generating considerable revenue, you may have a thin cash flow. This is because most business owners pay for supplies and labour upfront, but they receive payment from customers only after delivery or after a 30-to-45-day period.
A line of credit is quite handy to optimise your cash flow. You can use these funds to pay for current expenses and replenish them once you receive payment from customers.
#4: You have received a Huge Order
Maintaining inventory is a balancing act. If you have an extensive inventory, it could lead to cash flow troubles. On the other hand, a small stock means you miss on big orders. So, if you have received a large customer order, or if you’re anticipating an influx of several orders during festive time, then you can take a small business loan to create the inventory to fulfil these orders.
#5: You are launching a New Product or Service
Launching a new product is expensive. It requires expanding inventory, investing in new equipment, R&D, prototype development, trials and marketing, all of which costs money. Taking a small business loan can help you meet all these expenses without dipping into your existing cash flow.
#6: Your Equipment and other Business Tools are Outdated
Using outdated equipment and inefficient business tools impact your productivity and can even lead to loss of orders due to poor quality. If you notice that your equipment is facing frequent breakdowns, slowing in performance, it’s worth upgrading or purchasing new equipment to improve output quality. You can either take a small business loan or go for a machine loan to buy new equipment. The boost in efficiency your business gets from new equipment is worth the cost of buying them.
#7: You have High-Interest Debt
You may have taken a high-interest personal loan to fund your business operations. Alternatively, you may have high balances on your business credit card. You can reduce your overheads by switching to a short-term business loan or a line of credit at lower interest rates. It’s an excellent cost-saving strategy for businesses that initially took expensive loans while trying to get their business up and running.
#8: You are acquiring another Business
There are times when it makes sense to buy out a competitor or acquire a related business to expand and grow your scale of operations. However, taking over another company is expensive, and you need timely funding. A short-term business loan can help you pay for the costs of acquisition. You can then pay off the loan using the increased revenue you gain after this business move.
#9: Your Marketing Needs a Boost
As a small business, you need to invest in marketing to keep your company fresh in customers’ minds. Marketing can be expensive, especially when you are launching a new product or service. A short-term business loan helps you get the proper marketing and move your business into the spotlight, winning the attention of your target customers.
#10: You’re Relying Too Much on Business Credit Cards
Just like a personal credit card, having high balances on a business credit card hurts your credit score negatively. Having a good credit score is essential for the overall financial wellbeing of your business, impacting your chances of getting a bigger loan in the future when you need it. So, if you’re relying too much on credit cards to meet your operational expenses, you can consider other less expensive funding like invoice discounting or a line of credit.
These are just a few of the many situations in which your business may require a loan. Businesses across industries require timely and affordable financing to grow and thrive. Indifi offers a wide variety of convenient business loans and funding to help your business meet specific financing needs. Compare the different business funding products and choose the right one that fits your business.