Business Loans – A Block for Building a Business
In the hustle and bustle of operating a small business, there are times when help is needed in the form of a business loan. Typically, within the first two to three years of business operations, product and/or service offerings are validated and proven out by the marketplace. In the event that the business is able to attract demand and then to sustain and grow it profitably, there will come the inevitable need to get a business loan in lieu of obtaining private equity from investors. Why does this happen? Well, for one, the speed of cash received does not equal the speed of cash spent. Not all the time, but most of the time, the business becomes quite efficient in spending cash by providing a product and / or service, but does a poor job in recouping cash spent in a quick and efficient manner. As the business gets better at doing business, this inequity in the cash flow cycle smooth’s out.
Thus, business loans are understood as one of the necessary blocks to building a solid business. Not if, but when the time comes to take your business to the next level whether in satisfying growing demand for your products and / or services, taking advantage of business deals with tight deadlines, or paying off old loans with new loans with better terms, make sure you are ready to make the case.
Making the Case for a Business Loan
The absolute best case you can make in getting a business loan is the planning you do before you actually need one. A bit backwards thinking you may observe, but right nonetheless. See, most lending sources are conservative by nature due to the risk of losing money from nonpayment. Thus, by proving to the lending source your ability to repay with interest the business loan from historical evidence (and sometimes future projections based on practical, real life variables) such as a growing trend in both sales and margins (both gross and net), solid equity position as shown from a low Debt to Equity Ratio, and your track record in repaying other creditors on time, you will have made a clear case in obtaining a business loan. Remember to keep as a part of your overall business plan the need one day to obtain a business loan and operate your business accordingly. You’ll be glad you did.