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When a Small Business Loan Becomes a Strategic Move

An excellent article by Louis A. Del Monte.  Needing working capital is a natural business necessity no matter how profitable or successful.  Read more about the excellent use of a working capital loan and how it can grow your revenues and return on investment (ROI) when procured properly. 

A small business loan may be a strategic move. Almost any business may need a loan at some point. At first, this may sound negative. However, there are strategic reasons when your small business should get a loan. Let’s discuss them.

1. To expand operations – If your business is booming, you may need to add space, people, move to a larger physical location, and even add talent. In this case, a business loan makes strategic sense. The opportunity to expand your business and achieve greater profits outweighs servicing the debt.

2. To Purchase Inventory – If you have a sizable backlog of orders that you are unable to fill because of limited inventory, this is another strategic reason for getting a business loan. In fact, not doing so may damage your business in the form of lost customers and poor cash flow. This is especially true of small businesses that are seasonal in nature. If, for example, a business makes most of its sales during the holiday season, it makes strategic sense to purchase most of their inventory prior to the holiday season. The opportunity for a successful holiday season outweighs servicing the debt.

3. To Purchase Equipment – You may need addition equipment to meet increased orders or to expand your product offerings. If you need equipment to meet increased orders, that suggests business is booming. Getting a loan ensures you will capitalize on the opportunity to increase revenue and profit. Not purchasing the equipment may allow a perceptive competitor to offer better delivery terms and shut you out.

If you need to expand your product offering, this is potentially another strategic reason to get a loan. Expanding your product offerings potentially will make you more competitive, in the form of “one stop shopping,” and provide additional sources of revenue.

From a tax viewpoint, getting a loan can be a savvy move. You can take a significant tax write-off the first year and depreciate the rest of the equipment over its economic life. In either case, the additional revenue and tax write-offs associated with purchasing the equipment can outweigh servicing the debt.

 4. To Have Working Capital – Working capital is the money you need to run your business on a day-to-day basis. Sometimes a business may have a significant contract that will yield massive profits. However, the contract terms dictate payment in 90 days or even 120 days after the rendering the service or delivering the product. Often, larger corporations dictate these types of payment terms to small businesses. Put simply, big business is maximizing their cash flow at the expense of the small business. Unfortunately, you still have to pay your employees and other business expenses while you wait for their payment. One answer is a short-term business loan. This strategy will take the stress out of dealing with the payment terms of larger businesses.

5. To Consolidate Debt – Small businesses incur numerously debts requiring steep monthly payments. If you find your business in a situation of servicing numerous high-interest debts, consider consolidating those into a simple, transparent monthly payment and free up cash flow to run your business.

6. To Pay Business Income Tax – Many small businesses file their taxes annually. Unfortunately, they may have insufficient funds to cover their taxes. There are numerous ways to deal with this situation. One way is to arrange for a small business loan. This will remove the stress associated with dealing with the IRS and the potential penalties they may impose. However, before you make any decisions, you should consult with your attorney and accountant.

Often, when a small business needs a loan, time is critical. Unfortunately, according to Forbes you can “Expect to get an answer within two to four weeks.” Other experts state that traditional banks can take 60 to 90 days to approve a loan. This is likely not going to fit your time constraints.

Whether you need $10,000 or $500,000, Cardinal Business Financing, Inc. can help you secure working capital for your business.  Cardinal through its affiliations with over 75 different lenders and underwriters, along with it’s own access to capital will find the right loan product for your business.  Cardinal takes a consultative approach and will learn the what, how and why’s of your business to insure your success.  Cardinal Business Financing, Inc. is knowledgeable, efficient and responsive.  Most loans close within 10 days from application to funding.  Some as little as 3 days.  Click on this link to learn more about business loan opportunities:   Cardinal Business Financing Business Loans