When Should You Apply for a Small Business Loan?
Whether you want to apply for a small business loan or a short term business loan to pay for unexpected costs, much needed equipment repairs or you require funds for daily operations, it always takes weeks or even months to get approved.
The old adage of “banks will only give you a loan when you don’t need one” may sound familiar among small business owners. Yet, from a lender’s perspective, it rings true. So, why apply for a loan when you don’t necessarily need one, especially for a small business when budgets are tight, business is seasonal or competition is fierce?
According to the National Business Capital and Services, the reasons are simple. It’s always best to be prepared for the unexpected for positive business growth.
First off, the National Business Capital and Services suggests small businesses are always favorable for loans when sales are up, production is swift, and when your finances are balanced. It’s also important to remember that if you need extra revenue on hand for costly, unexpected projects, you will have the funds ready as additional loans can take weeks or months to get approved.
Secondly, it’s challenging to stay on top of industry trends and compete at the pace of other businesses in your industry. This is especially true when the competition heats up. The National Business Capital and Services suggests that to remain competitive, it’s best to have the funds ready when you need them to ramp up production, purchase more materials or need to increase staff. So, by proper forecasting, recognizing annual trends, and preparing months in advance for a loan from your bank is vital to remain at the top of your business’ game.
Additionally, many small businesses work in seasonal cycles. For instance, if you’re a proprietor of a landscaping company and your business has a solid revenue stream and realistic business forecast, applying for a loan to upgrade equipment or for other expenses in the off-season just makes sense. Plus, it will also make your business more efficient and competitive in the long run. Having the extra funds can also ensure sure you can make it smoothly through the slow season before business increases again.
It’s all too common for businesses to apply for a loan at the last minute when sales are down, costs are up, and/or credit or cash flow is running thin. So, it’s always best to be prepared and take advantage of what funds may be available for more positive business growth.