Small Business Loans.

Why should you get a business loan? The reasons a business needs a loan range from getting the company up and running to allowing it to grow profitably. A loan can help your company achieve its goals or provide the financial cushion it needs to take the next steps. If you aren’t sure whether taking out a loan is the right move for your business, consider some of the more common reasons companies apply for financing.

Getting off the starting block: Often, when entrepreneurs launch businesses, they will try to bootstrap, being frugal with their cash so they don’t have to borrow from external sources. For those that can’t raise the money alone, equity financing is a popular way to get a new business off the ground, but debt financing can also be used in the early stages if a company can show it will be able to repay.

Helping fund new equipment: investing in equipment that will improve productivity is a sensible reason to borrow. Business owners might use fixed-term loans for large purchases like machinery, vehicles or IT equipment. Hire purchase schemes and asset finance could also work well here; with asset-based lending, the thing you are borrowing to buy is used as collateral in the event you default on the loan.

Landing the right space: Whatever stage your business is at, having the right premises, factories or facilities is one of the most important things to get right. You’ll need to think about whether to buy or rent, and of course there are pros and cons with both. You could use a business loan for a relatively small amount of borrowing to put towards a property purchase, but in most cases it will probably be cheaper to take out a commercial mortgage. Bear in mind you might need a sizeable deposit. If you already own a building but you’ve outgrown it and want to buy something else, or you want a quick cash injection to complete a renovation, a bridging loan could give you the short-term finance you need.

Managing cash flow: You can also use loans to provide either long-term investment or shorter-term working capital. Working capital loans can help you bridge a funding gap on short notice, or respond to an unforeseen situation or emergency. They can be used to buy the raw materials you need to fulfill a big order, purchase inventory or to take on extra staff if you need them, but be sure any hires will bring in enough additional revenue to justify your borrowing. You shouldn’t use loans for ongoing expenses in most cases, as this is a sign that your business is not managing money well and you could struggle with the repayment schedule. You could also use a loan to refinance or consolidate existing debt to a cheaper rate.

Tapping new markets: If you’re ready to push into new markets, you might want to launch a new product or service that can make this happen. Borrowing could help you fund the research-and-development spend, and the marketing budget you need to promote it.

Keep an Ownership Stake in Your Company: Sometimes,  business owners choose to finance their business through investor funding. It is a way to get financing for your business that you will not need to pay back. There is a caveat though. When you bring on an investor or a team of investors, you give them a stake in your company. Depending on the number of investors you partner with, and the size of the ownership stake they receive, you might end up owning just a small share of your business. When it comes time to make important decisions, you might have less of a say in how the company operates or in the direction it takes. If you would like to retain as large a stake in your business as possible, using a loan to fund its growth can be the better option.