Loans can be a saviour in times of needs. If you’re in Australia, then you might already be under a lot of debt since Aussie household debt is said to be the highest in the world.
People are used to applying for loans to make their ends meet, which is why personal debt is pretty high in the country. However, the scenario is not very different in the business sector either as businesses also commonly apply for loans in Australia.
Many experts are trying to educate people about the side effects of loans, especially business loans, as failing to pay back loans can cause you to lose your entire business. While loans do have their own side effects, there is no denying the fact that they come with benefits as well.
Business lending experts Unsecuredbusinessloans.com.au say, “You can draw down funds for any purpose, but it’s best to keep the balance to a minimum as interest is usually calculated daily. It’s ideal for covering short-term gaps in your cash flow”.
The key lies in knowing when to apply for a loan. To help you in this regard, given below are five instances where it is acceptable and justified to apply for a business loan.
Reasons Why You Might Need a Business Loan
There are 5 main reasons why you might need a loan for your business:
- To purchase more inventory
- To move to a bigger office
- To buy equipment for your business
- To buy equipment for your business
- To build credit history for the future
1. To purchase more inventory
If your business has selling potential then you should make good use of it by buying more inventory to increase output. This is a good option because increased inventory means increased products, which would result in increased revenue due to a jump in sales. However, this will work only if you are able to sell all the extra units you produced.
If you are sure of a jump in sales, then applying for a loan to buy more inventory can be a good option. However, be sure of the reliability of the numbers as at times the jump is only temporary due to seasonal changes and other such reasons.
Moreover, make sure to pick a loan at a low-interest rate so that you do not have to pay a huge amount of your revenue in interest.
Note: Loans to meet a big order can also be a good idea as it can help you make new customers and grow your business.\
2. To move to a bigger office
If your business is growing then you would need to hire more people, for which you will need a bigger office space. For this, you will need money, especially if you intend to buy a new space, which is more expensive than moving to a rented office.
Do some research to find what’s more economical for you (buying or renting). Both options come with their own benefits. Also, remember that you’ll have to buy more furniture and spend on other items as well when you move to a bigger office, hence a business loan can be a good option.
3. To buy equipment for your business
Equipment financing is pretty common in the business world. In fact, there is a special type of loan just to buy equipment since no business can work without quality equipment.
If your old equipment is dying out or if you need to buy new equipment to increase production then you must opt for a business loan. Equipment financing is a good option in this regard as the equipment will be paying for itself.
4. To buy equipment for your business
You can apply for a loan to get rid of your pending bills to avoid the surcharge. However, this works only if the interest amount is lower than the surcharge.
Note: Do not apply for new debt to clear the old debt. That’s a trap.
5. To build credit history for the future
Banks often require a good credit history to approve loans. Applying for a loan just to improve your credit history can be a good idea, especially if you intend to apply for a big one in the future. However, do this only if you’re sure of being able to pay back the loan on time.
Apply for loans, but carefully!
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