When Is the Right Time to Get a Small Business Loan?

Business / Wednesday, August 19th, 2020

If you plan to start a business or if your business does not have enough cash flow, you might consider getting a business loan. Getting this loan might be easy if you have a few years of financial success. But, whether to get a business loan is not where most business owners get stuck; it is the timing that is difficult to get right. Getting a loan too early often leads to using the money for purposes it was not intended for because there is no immediate pressure to do so, while getting it too late might lead to you struggling to adjust to the repayments. So, when is the right time?

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When You Are Getting Started

It is obvious that when you are starting a new business, you will need inventory, furniture, office space, and some money to pay the first batch of new hires. Instead of trying to work around your personal finances to get the funds you need, consider a business loan.

Developing Business Credit

When your business is thriving, and you know you will need a lot more money in the future, building your business credit is a good reason to borrow. When you are able to borrow and repay on time, lenders will see that you are a low-risk borrower and will be willing to lend you a lot more money in the future.


Expanding a business is an expensive affair, as it often costs as much as starting a new business. Expanding does not only mean getting new office space; it might also entail developing new products, hiring new talent, or marketing to a new, bigger audience. All these things cost money and are all a good reason for getting financing for a small business.

Investing in Business Relationships

Cross-promotion and cross-selling are excellent ways to collaborate with other businesses, build new business relationships, and get into new markets. For this, you might need to buy new inventory and invest in marketing. This is a good way to spend the money you borrow because the businesses you collaborate with will also sell your products. This will lead to higher sales, thereby giving you an excellent return on investment.

New Equipment

Investing in newer, modern, and more efficient equipment is a good way to increase production or diversify the way you collect revenue. If you want, you can also use the new equipment to secure the loan, which could lead to getting a better deal on your interest rates.

Acquiring a New Business or Assets

Although yours might be a small business, it does not mean you cannot acquire other businesses if this is your goal. Acquiring a competitor’s business could be a path to growth and expansion, and if you can get the funds to finance it, you should think about it seriously.

Also, you can decide to acquire a business’ assets. This can include things like office space or equipment they no longer need if they are going out of business.

The question about when the right time is to get a business loan is a fairly complicated one to answer. The best way to know when it is the right time is to find out what your business needs at the time and if it will be worth it to borrow at that specific point.

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