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Finance
Home›Finance›8 Best Uses For A Small Business Loan

8 Best Uses For A Small Business Loan

By Vincent
July 12, 2018
658
0

You don’t have to be an expert on the economy to know that it’s tough out there. Business loans are one of the major ways small companies get funding they need to expand, grow clientele, and make money.

If the capital from a small business loan is invested and used properly, a small business loan can help a small company see almost instant results. Here are some reasons why getting a small business loan may be just what your company needs.

1. Buy Inventory

For retail businesses it is very common to take out small business loans to buy inventory, since buying enough to fill a store can be cost prohibitive, especially if you’re just starting out. A small business loan can be beneficial in these cases, particularly for those that sell seasonal products, since the store would only be open for a few months a year. This will allow the store to stock up on the needed inventory right away. Of course, this type of loan would be short-term since you should make enough money during the busy season to pay off the loan as soon as the season is finished.

2. Expand Physical Location

Expansion usually takes place when a company decides to buy more space in order to accommodate their growing and successful operations. If your business is successful and you want to build upon it, you may want to consider a larger location. This will allow you to fill the new location and expand your sales as well, which will be a return on your investment.

3. Purchase Equipment

It can be extremely expensive, and sometimes impossible to afford, to update old equipment or buy new equipment for a new company. If your company needs a lot of new equipment to make and sell your products, then you might want to consider a small business loan. This will allow you to lease or buy new or used equipment. Do a cost-benefit analysis before you do this so you can make the best financial decisions for your business.

4. Increase Working Capital

If your small business is just starting and you have a brand-new brand, you might not have the working capital needed to pay for day-to-day operations. Most small businesses need to take out a loan to cover these daily expenses until they start bringing in enough money to cover these costs. Eventually, you should start making enough money to both cover daily operating costs plus pay back the loan. The only downside is that these types of loans are seen as risky, so will probably have a higher interest rate.

5. Marketing

A small business will get noticed a lot quicker, and by more people, if they do a marketing campaign. This requires a marketing budget so you can advertise on TV, online, on the local radio stations, and in newspapers. A small business loan allows you to afford to put your name out there and introduce people to your brand.

6. Consolidate Debt

A small business loan is good to consolidate all your debt from product, employees, store front, warehouses, and more, into one easy monthly payment. This can reduce your stress and allow you to focus more of your energy and time to building your business.

7. Updates

An updated location with great visual appeal is always a great asset to any company’s success. It’s expensive to redecorate or redesign a retail office or store and you might not be able to pay for these out of pocket. This is where a small business loan would come in handy.

8. Build Credit

If you have plans to apply for larger-scale financing for your business in the upcoming years, it might be a good case to start with a smaller, shorter-term loan to build your business’s credit. If you pay your loan back on time, it can increase your chances of qualifying for future funding when you need more money.

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