Is it the best time to get that loan?

If you have a small business, chances are that you haven’t secured enough funds for your growth plans.

You can come up with a plan to obtain more funds for your business either through bank loans, personal investments, getting into business incubators, applying for government grants, venture capital or angel investors.

If you decide to take a loan, here are a few pointers to guide your decision: 

1. Expansion: If you have been turning down business because of lack of capacity, it is time to look for more funding for your business.

The extra funds will finance new hires, inventory, space or equipment. The fact that you will no longer be turning away business means that you will be able to pay off loans easily.

2. Cushion: Do you have a seasonal business? Consider taking a short term loan to give yourself a cushion for the lean months.

This cushion will help sustain the business until the high seasons. This can help you avoid laying off key employees or panicked price cuts. This strategy protects your business’ long term interests.

3. Sunshine: Has your business flourished in the last 12 months? As the old adage says, you should make hay while the sun shines.

Don’t wait till you’re in a desperate position to seek funds for your business. If you can secure a loan during your good times, it can give you a cushion when you encounter cash flow problems later on.

4. Credit building: If you have a new business with no credit history, you can take a loan to build your credit score. This can help you secure larger loans in future.

5. Golden opportunity: Sometimes, a golden opportunity can come to you for your business. For example, you might get a deal to supply your product to a large supermarket chain or a government institution. When such opportunities come knocking, you can take a loan to boost your capacity.

However, avoid taking loans when you have large unpaid loans, to make uncertain purchases for your business or as a band-aid for a mismanaged business.