Many business owners feel overwhelmed when they are choosing the best way to get their business growing or even sustaining performance. We will step through some business loan options to help you understand the benefits of using business loan for your business & things to avoid.
If your business is considering using a business loan to finance equipment, purchase IT, office furniture, property or even vehicles you need to consider the different finance options available to your business. This information will enable you to be more equipped to come up with a decision that will fuel the growth of your business.
If you don’t have enough cash on hand to purchase new equipment in full, then you’re definitely not alone. Most businesses at some stage in their journey will need to make decisions around how to grow, when to invest & will need to leverage a business loan.
For instance, running a delivery business doesn’t mean you have to invest a ton of cash to buy several vans. You can use a business loan to finance the purchase of vans and start operating your business sooner than you’d think. By using these loans, your business is given the opportunity to use the vans right away in exchange for making regular payments instead of paying the full cost of each unit.
Preparing to Get a Business Loan
When applying for a business loan, it’s essential to prepare a detailed business loan plan & outline the strategy around the way you intend on using the funds & how it will help you grow your business.
Providing a detailed plan with specific information will help advise your business with right type of business loan & payment terms.
When you have invested time & come to the conclusion that your business needs a loan you then need to identify factors to consider that make up this business loan plan:
- What type of business loan do you need?
- How much does your business need to borrow?
- What payback period are you looking at?
- How much interest will you be paying in total?
- What kind of security will the lender require?
- Is the borrowed funds going to add income to your business?
In most scenarios businesses will only consider a business loan when they are planning on growing their business or provide the tools, machinery to get the job done more efficiently for their team. If this sounds like you, great. It means that your business is growing and needing more resources to generate more revenue which will then mean servicing your business loan will be easy.
Managing Your Cash Flow
It’s imperative to understand the implications of securing a business loan as far as cash flow is concerned. Working with an accountant to prepare your cash flow forecast helps you see how the different financing options benefit & impact your bottom line.
Seasonal cash flow variations, for instance, requires the careful structuring of your business loan repayments to make sure that you can make timely payments and avoid hefty penalties.
You should also understand how and when your new equipment, vehicles will generate income for your business which be accounted for when looking for a suitable business loan. This includes assessing the productive life of the newly purchased, systems, equipment in addition to associated costs such as maintenance and repairs. Through this, you can avoid paying for the equipment when it’s already beyond its productive life or when it doesn’t do anything other than hurt your cash flow.
Seeking professional assistance from your accountant and a LoanOne Lending Specialist will guide you as you navigate all of these cash flow considerations and pick what equipment finance solution best fits your business needs and budget.