Growing a business can be a daunting and scary process for business owners. However, with the right steps, it turns out to be rather rewarding. Sometimes, business owners need all the help that they can get to bring their business to the heights that they want to achieve. It can be anything – from opening a new location to hiring a new team lead. All small steps taken for your business can ultimately lead to more success.
Growing your business requires something most business owners dread seeking from investors – funding! And an expansion often means going for that occasional small business loan. In this blog, let’s discuss all the reasons why an online business loan might be the best bet for your business at the moment.
What are Business Expansion Loans?
First off, what even are Business Expansion loans? Business expansion loans are a special type of loan that business owners can use to ultimately expand their business to new heights. The term ‘expansion’ here is relative to each business separately. This can mean getting new machines, opening newer locations, hiring more staff for projects, tapping into a new market, or simply just scaling up.
Weighing The Pros and Cons of Business Expansion Loans
Before deciding on your business, you must take all aspects of the loan into account. Here are the Pros and Cons of Business Expansion Loans:
The Pros
The pros include:
Tax Benefits
The interest charges that are paid on each business expansion loan are tax-deductible as it is deemed as an expense in the financial statements. This helps in reducing your business’s tax liability. However, it is important to note that the initial or principal amount is not tax deductible.
Build Credit
Taking out a small business loan is a great way to build your business credit standing and history. It can help you reflect a strong payment pattern and helps your business qualify for loans in the future with that have much better interest rates.
Quick Access To Funds
Lastly, and most importantly, you are getting quick and easy access to the funding you need for that expansion. With the quick funds, you can speed up the expansion project, removing any hurdles you may have had otherwise.
The Cons
The cons include:
High Interest
The biggest and most frowned upon drawback associated with business loans is the high interest that comes with it. Or any interest at all. Why? Because any interest associated with the loan means additional expense for the business when the loan is repaid.
Debt
Business loans are essentially debt when added to the business’s balance sheet. This increases your business’ financial liability and can essentially limit you when taking out another business loan in the future.
Bankruptcy Risk
The risk of bankruptcy always looms over a business. If your business is unable to make timely payments, it can significantly negatively impact your credit score. This shakes your history and credibility long term. Furthermore, defaulting on a loan may also lead to legal troubles.
Factors to Consider When Applying for A Business Expansion Loan
Applying for a business expansion loan is a lot like going for loans for bad credit when your credit is tanked and an unexpected expense pops up. Making this decision for your business may make or break your financial holding. Here are the factors to consider in this decision:
Is Your Business Ready?
To get the correct conclusion, you must honestly assess your current situation. Is there now enough cash flow in your company to pay back a loan? Lenders seek assurance that your company can support the debt and that you will make timely and consistent payments. Always go for loans for bad credit when you have a clear plan to pay it back.
Do You Have a Sound Business Plan in Place?
Are you able to explain your plans for the money you need and how much you need? “As much as I can get” is not an answer that lenders particularly like to hear. If you can clearly state your plans for the cash and have calculated the exact cost of the expansion, your chances of success will be considerably higher.
How Does the Business Credit Profile Look Right Now?
Does your business credit profile sound enough? While most business owners are aware of their credit score, they are often unaware of their company’s credit profile. It’s important to be aware of both your personal and company credit scores before speaking with a lender.
Where to Look for This Loan?
Simply put, there are probably some lenders that will make more sense than others, depending on how much money you’re seeking, how long you’ve been in business, the industry you’re in, and your business credit profile. Several online solutions might be a better fit in addition to the bank.
Terms of The Duration of Loan
Is an extension going to need a larger commitment of three, five, or even ten years, or is a one-year loan a reasonable option? For instance, adding an extra 3,000 or 4,000 feet of warehouse space might be a better fit for a longer-term loan than expanding a restaurant’s outdoor service area. These are two very different types of expansion projects.
Sustainable Growth with Online Loans
Online loans available for business expansion loans can provide you with reliable solutions in the UK that you need to expand your company. Names like SME Loans, 365 Finance, and CashCompare can provide you with up-front, easily available options.
Loans can provide a very sustainable growth medium, as they allow your cash flow to continue uninterrupted. The expansion surely means newer means of cash flow, making them pay themselves off in the future. This is why businesses do not mind the interest fee that comes with it!
In Conclusion
Feel like your business could use an expansion loan at the moment? Does your current financial statement check all the boxes? Maybe it’s time you check out the available options for a business expansion loan. Make sure that you have a sound plan in place for the expansion, and pay the loan back on time to avoid future credit problems!
