Debt is often seen as a bad thing to acquire, but in many situations it can actually be beneficial to borrow money. For example, lots of people have a mortgage or a car on finance – this is considered manageable debt as long as you can afford the long term repayments. Also, if you’re borrowing money in order to make a profit in the future, then surely this makes business sense?
When it comes to starting a business, few people will be able to launch a new company without a business loan or initial investment from funding streams. Start-ups have no choice than to borrow cash because capital is needed to start a business – but a successful business will be able to build from the initial loan and ensure they start to increase their return.
The average person can’t get through life without having to borrow at some point, whether it’s a credit card or a long term loan. Here are some reasons why taking out a business loan could be one of the best decisions you’ll ever make.
The only way to build good credit is to lend and prove you can pay back creditors. You may have spent years trying to build up a good credit profile, but this only applies to you as an individual. So to build up good business credit, you’ll have to borrow cash in the name of the company. Credit building is important if you anticipate more borrowing in the future or pitching to investors. Of course, it is crucial to always make repayments on time or you could damage your credit score.
Most of the time, the only way to grow is to invest. And if you don’t have the working capital to invest in bulk stock orders, new equipment or a bigger business premises, then you can’t achieve business growth. If purchasing the latest machinery is going to improve your bottom line, then it may be worth getting in a little bit of debt for.
Keep up with market changes
If consumer trends change or the market you operate in is evolving, then your business needs to keep up. If you get left behind, your competitors will soon have your customers, and your company may be at risk of going bust. For example, a modern refurbishment in a local café can keep regular customers happy and attract new custom at the same time, or you may need to do some research and development to maximise your offerings and boost revenue. If you don’t invest in your business in the right way, it will soon be old news. Borrowing money to make necessary adaptations can save the business.
If you’re confident that you can pay back the business loan amount, then it’s usually a risk worth taking. Discuss the lending opportunities available with a loan broker, who can advise the best type of finance to apply for.