Small Business Advice: Should You Get a Loan?

You know that you want your small business to do well, but you also know that you do not have adequate funds to fulfil all of your great ideas for business growth and success. However, you are not alone if you feel some sense of trepidation at the prospect of taking out a loan for your business.

The very good news is that taking out a loan does not have to be scary or financially crippling. A range of different products and possibilities exist, and to understand the options that are most appropriate for your small business, it’s advisable to speak with experienced professionals and a reputable organisation, such as Short Term Business Loans Australia.

What do you need to consider?

In advance of initiating discussion with a financial lender, investor or broker, it’s important to be sure that both you and your business are well-positioned to seek finance. Think of the following…

Do you have a well-thought out business plan?

You should have a business plan that is both well-researched and concise. While a potential lender is unlikely to have time to wade through a very long document, they need adequate detail to motivate and convince them that financing your business is worthwhile.

Know the numbers of your business

It’s critically important that you know the most important financial figures of your organisation – and the importance of this remains regardless of whether or not you are responsible for the preparation of financial statements. Be sure that you know accurate figures for the current income, net profit, areas of expenditure, and projected income and expenditure of your business.

In the event that you do not feel confident enough to answer questions of this nature, it’s a good idea to have a business advisor or accountant with you when you meet a potential loan provider, so that they can assist you to provide clear, accurate answers.

Know your financial limitations

Working out what you want is often the most fun part, but it’s imperative that you also define your financial limitations. For example, you need to be clear about whether the money is required upfront or on an as-needed basis, the maximum repayment arrangement that you can manage, your Loan-to-Value Ratio, the assets that you have that may be required for collateral, the equity you can contribute, and the details of a guarantor if one is required for your loan.

These are just some of the key areas to consider. Above all else, you need to feel confident that you are not getting in ‘over your head’ but can afford to repay any loan you may take out.

Comparison shop

As you go about seeking finance, it’s recommended that you make the effort to shop around. A range of different products are available with different discounts applied. For example, some lenders extend discounts to existing customers, but cheaper options that offer greater flexibility may be available with other providers.

A loan may represent a great way for your business to develop, grow and experience success in the long term. It’s wise to explore the options and obtain credible advice, so that if you do enter into a loan arrangement, you are confident that it is manageable and appropriate for your business.