How to Determine if Your Business is Ready to Take a Loan

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Loans are an effective way that business owners can take their brands to the next level. Founders that stand benefit from an influx of capital should consider the following information to determine if their business is ready to take on a new loan:

1. Scale-Up and Expand

It takes money to make money. Even as small businesses find success early on, to continue making more money, they’ll need to expand. While some businesses can expand naturally, others aren’t able to cover the operational expenses that scaling presents.

Since scaling a business always comes at a cost, it helps to offset these expenses as much as possible. With small business lending, entrepreneurs can start expanding their brand without having to pay out of pocket to do so.

2. Hire New Employees

Small business owners often hire extra help as needed. Even as sales increase, business owners that aren’t able to afford the extra help end up saddled with the responsibility of doing everything themselves.

Businesses that need new employees can rely on small business loans to help cover the costs of adding others to the payroll.

3. Overcome an Unexpected Financial Crisis

Need a Loan? 5 Better Ways to Know If Your Business is ReadyUnexpected crises such as the coronavirus pandemic can ruin small businesses. With so many companies shut down as a result of COVID, many businesses are in dire financial straits.

Small businesses struggling to stay afloat and cover their expenses can turn to loans for a short-term financing solution.

According to the experts at Lantern Credit, “loans help small businesses cover everything from payroll to paid sick leave.” In the middle of a global pandemic, this type of instant influx of cash can be the difference between closing one’s doors for good and making it through another week.

4. Keep up With Increasing Demand

Businesses that are doing well will experience an increase in demand. The better a business does, the more customers will want their offerings. Despite an increase in sales, small businesses may not have any extra cash to cover the cost of new inventory. This makes fulfilling orders challenging, which puts the future success of the company at risk.

Thankfully, with a small business loan, founders can immediately access the capital necessary to grow their business. By securing a loan, business owners can keep up with demand and use the incoming sales to pay off their debt quickly.

5. Improve Business Credit

Business credit is important for small businesses. Just as one’s personal credit score affects one’s financial standing, having a solid business credit score is very important. With strong business credit, founders can grow their companies by getting approved for larger lines of credit and more attractive loans.

Building business credit takes time. By applying and qualifying for a loan, business owners can improve their creditworthiness to lenders. By paying off this debt on time and in full, business owners will continue to improve their credit profile.

Taking on a loan comes with a lot of responsibility for small businesses. With this guide in mind, business owners can better determine if taking a loan is the best next step.

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