Five reasons why taking out a loan could save your business

Here, we look at some of the most common reasons for a small business to take out a loan.

According to research, 50 per cent of businesses fail within their first year. Further studies show that one of the main reasons for failure is the lack of finances. Most small businesses are started with the aim of creating a new outlook in their respective industries, and the plan is to get funding along the way. Unfortunately, it does not always work, especially when investors are not sold on the business idea.

As much as taking a loan may not be in your immediate plans, your business will stand a better chance of surviving its first year if you talk to a secured loan expert. A loan expert could consolidate your assets and let you know how much money your assets can secure.

Reasons for taking a loan

You are ready to expand

Your current office cannot hold all of your employees any more. Your new assistant has to set up in the kitchen because there is no available space for her. Well, these are signs that you are ready for a new abode. It also signifies that the business is doing well, and has possibly broken even. The better news is that you can use the new offices as collateral.

You need assets for the business

Your business needs machinery, IT equipment, and more office equipment for you to become more productive. It is evident that these assets will cost a pretty penny and your small business may not have that much in cash to acquire all that you need. This is the point where you will need financing to get the business to the next level.

Building credit for the future

As your small business grows, you will require more cash than you can take out of profits. It will be near impossible to expand without credit. This is the time to start building your credit for the future. You could start with small loans just to prove your credit worthiness before moving in for the big monies.

Opportunity knocks but once

You have received this significant order, and you will need more money than you have in your coffers for inventory. What to do? This is the perfect time to take out a loan. The best thing about such a deal is that returns are guaranteed, and so you are sure to repay the loan in the agreed time. Another opportunity could be the chance to buy inventory in bulk to get great discounts. If you were certain this stock would sell, then the benefits of getting a loan would outweigh the risk.

Time to team up

When you are getting started, you will do everything by yourself. You would make time for bookkeeping, marketing, manning the phone, and fundraising. As the business grows, you become busier, and you will certainly need to delegate those to roles. You may not have the capital to hire a whole team, and so a business loan could come in handy. Human resource is a valued asset to any business, and so the cost will be worth it.

Reach forth, grow

Debt is only a mistake if the business is unable to repay it. If well utilised, it could be the difference between the business making it past the first year of operation and failing miserably.

Looking for finance? is working in partnership with trusted lenders to help you find the best business funding deals. Find out more here.

See also: How a small company can get a business loan – Three options

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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Small Business Loans

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