Small business loans can meet a number of needs, and when you're considering financing, it's important to have a clear idea of your business goals. Taking out a loan means committing future cash flow to repaying it, and it's not something you want to do without understanding a) the types of loans available and b) what advantage a loan is likely to yield for your business.
With that in mind, there's a fairly broad range of things that a small business loan can help you achieve, including (but, not limited to):
- Expanding your business into a new location
- Renovating an existing location
- Starting a franchise
- Setting up or revamping your small business website
- Funding a large-scale marketing campaign
- Purchasing new equipment
- Buying new vehicles for your business or repairing existing ones
- Hiring new seasonal or full-time employees
- Purchasing inventory
- Consolidating or refinancing existing business debt
- Developing a new product
- Paying your employees
- Covering day-to-day expenses, such as rent, utilities or insurance
- Purchasing real estate
In each of these scenarios, it's important to look at the potential payoff. For example, if you're using a term loan to develop a new product, would the product become profitable enough to justify the cost of the loan? If you're considering a loan to hire new employees so you can expand your services, what kind of return on investment (ROI) can you expect?
One important thing to consider is whether you're looking to make a short- or long-term investment in your business, since that can influence the type of loan you choose. If you need cash to cover payroll temporarily, for example, a loan with a shorter repayment term would likely make the most sense.
On the other hand, if you're tackling something big, like a complete overhaul of your computer equipment or a land purchase to build a new location, a long-term loan may be more attractive. Thinking carefully about how you plan to put a small business loan to work can help you narrow down your options to the one that's going to give your bottom line the biggest boost.
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