A business plan is your way to map the future and to put your growth plans on paper. However, to bring your plans to fruition you need funding. Have you considered taking an SME loan?
A loan is not a bad idea. There comes a point in every SMEs life when it needs to take a loan. Here are a few instances when your business plan needs to include opting for an SME loan
Expansion to other locations
If you are looking to expand to other locations or want to take your business to new markets, banks are more likely to look at you favourably. A business that has its eyes on expansion plans is a successful one and makes for a promising customer. Purchasing real estate in your own city or another is an excellent idea, and you will mostly get an SME loan for the same. These loans are also more long-term and work advantageously for both.
Credit for the future
A fledgling business often doesn’t have a good credit rating, which can affect its chances of qualifying for a large loan in the coming few years. A quick small business loan is a way to begin building on this business credit.
Making regular, on-time payments will help build favourable credit history for the business. But be very careful about the payment. Even one late payment can affect your credit rating worse than not having ever applied for a loan.
Capital required for purchasing equipment
As an entrepreneur, you have an option to lease or purchase new equipment. It makes business sense to buy, and to take out a loan to do the same. For starters, you can own and use the new equipment for life, and later look at selling it off to recover some costs.
Secondly, you can get a tax rebate on your new purchase for the first year and get depreciation benefits for the remainder of its working life. Of course, we recommend that you do a cost-benefit analysis before you take your decision. Understand the pros and cons of both options and choose the one that offers you the maximum benefit. You can avail of an intermediate term loan for purchasing equipment.
- To prepare for a potential business opportunity
A new business opportunity is always welcome. However, to cater to the demand of the new project, you might need to purchase new equipment, hire more skilled people or invest in bulk inventory. By weighing the returns of the investment against the liability of the loan, you can make a revenue forecast to decide if the numbers are in your favour.
Purchase more inventory
Some businesses have seasons where their sales shoot up. They might need to take a loan before the season begins to stock up on the much needed inventory. Banks are willing to give business loans for SMEs in such cases for the purchase of inventory. These loans are usually for a short-term and a business needs to pay it off within the stipulated period.
When you sit down to make your business plan, use these points to understand whether taking a loan can help you reach your targets faster while comfortably paying off the debt. Do remember, some of the business loans for SMEs can attract higher interest rates because of the risk for the lender.