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13 Jan
  • Editorial Team
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Money or funds are the lifeline of any business. If you have the right amount of funds, along with the time and effort required; then your business is bound to succeed. It might take a bit longer than anticipated, but your dedication and hard work will ensure continual growth and expansion of your business endeavour. These attributes work best if you have self owned funds, in case not, then don’t worry, as financing is easily available for high potential businesses.

Additional funding can enable and give a boost to your professional and business dreams. It can facilitate expansion, provide adequate working capital, and allow for swift adaptations to dynamic market conditions, among others. However, one should be careful and ensure financial prudence while seeking any sort of external funding. Points to keep in mind are: Purpose, Amount Required, Tenure, Rate of Interest, Part-payment & Pre-payment Terms, Methods of Repayment, etc. If you carefully assess and evaluate each point you will be able to get the best deal. So why should one opt for business loans or business financing in the first place? Read on and find out:

  1. Purchasing More Inventory: Inventory forms one of the most important parts of every business. With an increase in demand, there is an increase in the inventory required. You can only sell when you have enough stock, and maintaining high quality inventory becomes pertinent. Funding in the form of a business loan or business finance will help make purchases based on requirement.

  2. Upgrading Machinery and Equipment: Whether you are a manufacturing company or a service provider, there will always be a need for newer and/or better equipment at your office or factory. From large machines, computer hardware to software. A better more efficient version of something or other will always be available. Business loans can help purchase new or upgrade existing equipment.

  3. Expanding to New Locations/ Bigger Office: If your business has been doing well and you plan to take it to the next level, a bigger office is the logical next step. Expanding your current office/ factory or moving to a new one requires additional investment. Even if the expansion is limited to a few cubicles, it still requires money, and this is where business financing steps in.

  4. Hire Additional Staff: Payroll is a major expense for most businesses; and one can never ignore the fact that human resources are an extremely important part of every business. If you are looking for fresh talent, and the expenses for it fall out of budget. Then seeking external funding is a good idea. More so if hiring new staff will help execute new projects/ assignments, thereby boosting your long term profitability.

  5. Seasonality: Those running a seasonal business know about the highs and lows of such business models. If your company blooms in the summer months, you will require additional capital to remain in the business during the lean winter months. Seasonal companies may also require additional inventory. Extra funds can allow your company to stay afloat during the lean period.

  6. Build Business Credit for Future Financing: Securing short term loans and paying them off in due time, can assist in building business credit for future needs. A good credit history ensures that your future financing requirements are fulfilled in a quick, easy, and hassle free manner.

  7. Converting Multiple Small Loans into a Single Loan: Many businesses have multiple loans that they might have taken for various purposes. This can be a pain to maintain and manage as it requires multiple monthly payments, and if you erroneously miss a payment. Then it could impact your credit score as well. Converting smaller loans into one/ two larger loans will reduce paperwork and repetitive tasks.

  8. Switching to Lower Interest Rates: If your existing loan was sought sometime ago and is priced at a higher rate of interest in comparison to prevailing interest rates. Then you should seriously consider transferring your loan to a different financier or renegotiating terms with your existing financier. This will result in reduced monthly installments, and a lower overall debt. On high value loans, even a single percentage point can save you large sums of money.

  9. Maintain Control and Maximize Shareholder Earnings: Every shareholder would like to maximize his return on investment. Debt financing help in retaining control, and maximizing shareholder earnings during normal/ standard business scenarios. This becomes even more apparent during times of business boom or high growth.

  10. Unforeseen Emergencies: You might have planned for everything, but life can still surprise you. There can be many unknown and unforeseen situations for which you may not be adequately prepared. It could be a glitch or virus attack on your IT system or a natural disaster in your operating area, or anything else. During such times, additional funds always help in salvaging the situation.

Today, business loans or business finance is available in various forms, including short and long term tenures. These loans not only help in running your business, but also provide the required cushioning during tough or lean periods. So wisely choose a trusted financing partner and accomplish all your business goals and dreams.

Did You Know

Disbursement

The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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