For entrepreneurs, a business loan is like a backup weapon to keep the business running. Especially, if there are no reliable personal assets or idle funds.
Debt is not recommended, but if used for productive activities, loan funds can actually provide benefits.
Currently, there are many business loan services to choose from according to your needs and abilities. For example, you can consider secured credit from banks if you need a loan with a large ceiling and low interest rates.
Or if the additional funds needed are small and can be returned in the near future, you can look at unsecured credit loans.
However, even though a business loan is classified as productive debt, it does not mean that you can apply for a loan carelessly. If not calculated properly, productive debt can also make you bankrupt.
For example, defaults on paying installments until the loan interest swells. If the business profit is only enough to cover loan interest, when will you be able to do it?
The right time to take out a business loan is when it’s really needed. The question is, when does a business need a business capital loan?
The following are answers that can be taken into consideration before applying for a loan.
1. Business expansion
You want to expand your business because sales have been very smooth over the last few times. The market is wide enough, the demand is huge, and regular customers are already significant.
Under these conditions, expanding the business is an opportunity that is a pity to miss. Either by opening a physical store after selling online for a long time, opening new branches or adding product variations.
With the correct calculation, business expansion allows a significant increase in sales, so that the profits can be multiplied.
But, one thing is certain, business expansion requires additional capital and business capital loans can be an effective solution.
Taking a business capital loan does not mean that the entrepreneur does not have adequate finances. However, managing Payday Loans funds can actually be a strategy to keep business financial cash flow smooth.
After all, if the business is running smoothly, the installments and interest on the loan can be covered with the profit you get later.
2. There was a disaster or unexpected event
Every entrepreneur must be prepared to face the various risks that exist. Starting from the emergence of intense competition to unstable market conditions.
You don’t need to stay far away, the corona virus outbreak which is now a pandemic is proof. Not only threatening health but also business continuity in many sectors. For example, the tourism sector to the owner of food stalls.
As a result, not a few business owners have to lay off their employees or even have to go out of business. The conditions amid the pandemic also affect the level of purchasing power and consumer spending styles.
For example, some residents have replaced coffee with spicy drinks to maintain body immunity. Following market demand, several coffee shops have also innovated by providing a variety of immune support drinks.
When disaster or unexpected events occur, sometimes entrepreneurs need to adapt by making business innovations according to market demand. However, if the capital runs out first, then it is fine to apply for a business capital loan.
3. Improve cash flow
No matter how big the profit is, if the business cash flow is messy it’s also a lie. If business is a body, cash flow is the blood that pumps the heart to keep the body alive.
Cash flow or the movement of funds into and out of operations accurately informs the financial condition of the business. This information is useful as a basis for business decisions taken.
For example, when cash flow is positive or expenses are less than income, you can place a larger emergency fund or increase the amount of production.
Conversely, if cash flow is negative or stuck, you need to take steps to remedy the situation. For example, when the bill for production costs has not been covered and at the same time you have to pay employee wages.
In this condition, you can take out a business loan to smooth cash flow and keep the business awake.