Taking the leap to expand in business is scary, especially if you have to take out a commercial loan. No one likes being in debt. Thoughts about what could happen to your company and employees are enough to keep any business owner awake at night.
But when you take out a loan for the right reasons, it can also be the pathway to growth.
That’s why we’re sharing with you 7 reasons why your business needs a commercial loan. But first, let’s get to know the basics.
What You Should Consider Before You Take Out a Commercial Real Estate Loan
Getting all the facts before taking out a loan ensures you focus less on your loan and more on your business. Here are three things you should do before you get a loan.
1. Look Before You Leap
Before you take out a loan, take a look at your current finances. Then do some future projections. Know what your next six months look like before you take the leap.
If you think you and your business are ready to handle a loan, then do it. Just make sure you completely understand the terms and conditions of any loan you take out before you sign on the dotted line.
Lastly, don’t be afraid to ask questions. The more you understand what obligations you’re taking on, the better off you’ll be.
2. Prepare for a Thorough Inspection
Before you take out a loan, you’ll need to get all your documents ready. Most lending companies will want to see them. This is a great time to get all your documents organized.
Getting organized before taking out your loan will also help you focus on productivity, rather than chaos. So while you’re at it, organize everything you can within your company.
Another important step is to assess the condition of your property and do anything you can to make it look better. This could just be cleaning it up or it may involve handling needed repairs.
3. Go Online
The chances that you’ll be able to secure a loan with a brick-and-mortar bank are slim. They rarely give out loans to small businesses. Here’s why:
- The minimum amount is usually too high
- They charge fees just to consider your application
- Require a detailed business plan
- Often require you to use personal property as collateral or personally guarantee the loan
So go online and see what is available. You’ll have a much higher selection of options to choose from and you won’t have to get dressed up. Remember to be patient, this isn’t always a quick process.
But if you’re thinking of taking out a loan, here are 7 great reasons why:
1. You Need to Hire Great Talent
Every great employer knows that in order to be successful, they have to hire people who are smarter, more dedicated, and more talented than they are. Then they have to retain them and pay them what they’re worth.
Talented employees have higher salaries which may not be so easy to pay with your current cash flow. That’s where a commercial loan comes in. Just make sure you’re hiring the right talent before you take on a loan.
2. Your Physical Business Needs to Be Larger
When your business is literally bursting at the seams because you’ve outgrown your space, it’s a wonderful cause for celebration. It’s also time to expand.
The great part about taking out a loan when you need to physically expand is that you’re expanding because you’re already successful. It takes some of the worries out of taking out a commercial loan.
Before you take out a loan, know the steps you need to take to find the right office space for your expansion needs. It will help you budget properly.
3. You’re Looking to Increase Your Inventory
A lot of businesses have seasonal ebbs and flows. Sometimes in order to prepare for an expected uptick in business, you need to increase your inventory. But that doesn’t always mean you have the capital and a loan is necessary.
To take out a loan your business can handle, look at your financial records from the same time of year for a few years back. It should give you a better idea of how much business to expect this season.
4. You Need New Equipment
Obviously, new equipment means your business is more productive. So usually it’s a no-brainer that a commercial loan is necessary for new equipment.
Just make sure you’re taking that loan out for the must-haves rather than the, “wouldn’t it be nice if” purchases.
5. You Need to Build Credit for the Future
Not all business owners have great credit when they get started. Especially if you’re young. Taking out a small commercial loan can help you build the credit you need for future projects.
Just don’t take out a larger loan than you can easily pay back. One missed payment will cost you.
6. An Opportunity Has Appeared
Sometimes a business opportunity is just too good to pass up. But that doesn’t always mean you have the current capital to be able to take up that opportunity.
Say you own a pool cleaning business. A local gym that has 10 locations around your city wants to give you their business. You just don’t have the equipment or manpower to handle the job.
Taking out a commercial loan would allow you to expand enough to fulfill that job. Just make sure you don’t underestimate the costs or worse, overestimate the profits you’ll make from this opportunity.
Also, get the opportunity in writing before you take out the loan. More than once promises have been made only to fizzle out at the last moment.
7. You Need to Increase Your Working Capital
Sometimes there are more bills to pay than money currently coming in. This is usually when a business is just starting out. Or in the middle of an awkward growth phase.
When that happens, taking out a commercial loan ensures that everyone gets paid. It also means you can continue to run your business smoothly and focus on growth and productivity.
We know that smaller businesses sometimes have a harder time procuring loans. That’s why we offer multiple different alternative financing options. See if you pre-qualify for one of our loans.