As a small business owner, you understand how expensive it can be to rent a building, pay your employees and fill orders. In fact, you may have had to turn away orders or otherwise decline a chance to grow your business because there wasn’t enough money to capitalize on that opportunity to do so. Fortunately, it may be possible to receive small business loans or lines of credit to ensure that your company has the cash it needs to survive and thrive.
How Small Business Loans Can Help You Meet Demand Spikes
Small business loans may provide your company with thousands of dollars in working capital to buy raw materials or other supplies needed to fill a large order. For instance, you may be able to temporarily rent a larger production facility or use the money to have a packing company produce and ship goods to your customers. If you are in a service industry, a small business loan or line of credit might make it possible to hire technicians, sales representatives or others who can work directly with your customers.
Buying in Bulk Can Lead to Lower Production Costs
As a general rule, suppliers will charge a lower price per unit if you are willing to buy in larger quantities. By reducing the cost to produce a product, it may be possible to reduce the price that you charge the consumer. Alternatively, lowering your production cost will increase your company’s margins, which may provide greater financial flexibility in the future. Obtaining a loan or drawing from a line of credit may provide you with the ability to purchase supplies in bulk or fund larger production runs.
Get Access to the Cash Needed to Acquire a Commercial Property
If you were in the market for a residential property, you would likely need to get a mortgage. To be approved for that mortgage, you would probably need to make a down payment of up to 20% of the home’s purchase price. Generally speaking, you will also need to obtain a mortgage to purchase a warehouse, factory or other type of commercial space.
A small business loan may help you obtain money for a down payment, obtain the money needed to purchase a commercial space or both. In some cases, your lender will provide the capital necessary to make improvements to a space or otherwise refurbish it to meet your company’s needs.
Small Business Loans May Be Preferable to Outside Investment
An investor may be able to provide your company with both working capital and important insight into how to make the business better. However, when you bring an investor on board, that individual gains influence over how the company is run. When you borrow money from a lender, you retain complete control over your organization, and your only obligation is to make sure that the loan is repaid in a timely manner.
Your Business Might Not Be Ready or Suitable for an Investor
Your company may be too new or too small to attract the interest of an investor. Therefore, the best chance to help the business grow over the next several months or years may be to apply for small business loans or lines of credit. Generally speaking, small business lenders will consider a variety of factors when determining whether to approve your request for funds.
These factors may include your company’s gross sales over the past year, its profit margins or the industry that it is in. In most cases, small business lenders will provide financing to those who have less than stellar personal or business credit scores.
However, you will likely need a credit score of at least 640 to qualify for a traditional term loan. If your lender reports your payment history to the major credit agencies, a small business loan might help you establish or reestablish a positive credit score and history.
Get the Money That You Need Quickly
Small business lenders may be able to review and approve your request for funds in as little as 24 hours. In many cases, you can get the funds in as little as 72 hours. If you were to get a loan from a traditional bank, it might take several days or even weeks to review your business plan, credit profile and other information.
It can also take a typical bank several more days or weeks to disburse any funds that you were approved to receive. By the time you get the money, it may be too late to fill an order in a timely manner or put an offer in on the building that your company needs to expand its footprint in the community.
Benefit From a Variety of Repayment Options
Loans that are designed for small businesses tend to have flexible repayment options. For instance, you could choose to make interest payments on the outstanding balance over a period of several months or years. At the end of the loan term, you take care of the principal balance with a balloon payment.
Alternatively, you could opt for a traditional installment loan that has you pay a portion of the principal balance plus interest each month. If your company accepts credit or debit cards, it may be possible to obtain a merchant cash advance. In most cases, you pay a percentage of credit or debit transactions that are processed each month.
Your lender may assign a case officer or funding specialist to work with you directly. He or she may be able to help you decide what type of funding solution best meets your needs both now and over the life of the loan.
Obtaining Assets Makes Your Company More Valuable
Simply owning a parcel of land, a building or a large piece of equipment can make your company more valuable. Generally speaking, land and real estate will appreciate in value over time. There is also a chance that equipment will either appreciate in value or at least maintain a steady resale value over the course of its useful life.
Furthermore, you may be able to depreciate an item for tax purposes over the course of that item’s use. This could allow your company to save a significant amount of money on its income tax liability. Depending on how your company is structured, it might also allow you to save money on future income tax liability.
When assessing your company’s market value, it is also important to consider the value of intellectual property that the company owns. For instance, a buyer may be interested in paying more for a business that has patented a process to make food last longer or to keep drinks fresh for years at a time. It might be possible to use a loan or line of credit to pay to develop the formula or other technology that could be used to give your company a competitive advantage. As long as they are convincingly justified, research and development are usually considered valid reasons for a small business loan.
Assets May Be Used to Obtain More Funding
The assets that you obtained with a small business loan or line of credit may be used to help your business acquire additional funds in the future. For instance, a lender may accept a parcel of undeveloped land near your company’s headquarters to be used as collateral.
You might also be able to borrow against the value of a warehouse, factory or office building to finance the purchase of more land or machinery. If you don’t want to borrow more money to finance your company’s expansion, you can choose to simply raise the funds needed to do so by selling property that the business owns.
Be Sure That You Can Keep Your People Happy
Companies that don’t pay their employees well or on time tend to have a hard time attracting quality personnel. If your business can’t attract quality employees, it may be difficult to provide the type of service that your customers expect, and if your customers don’t get the service that they expect, they will let others know about it.
However, if you are able to attract quality employees, they will help create positive experiences that your customers will tell their friends and family members about with a confident recommendation. Furthermore, employees who feel as though they are treated well are more likely to serve as ambassadors for your brand. Ultimately, having the money available to keep your people happy will go a long way toward creating a strong and trustworthy brand image.
If you are seeking to grow your company, it may be in your best interests to look into small business loans or lines of credit. You can learn more about your loan options by contacting Small Business Funding online or calling us today. If you’d like to finance your business, apply now.