4 Situations For The Right Time To Take A Business Loan


The thought of taking up a business loan in Singapore is often met with negative responses, especially from close friends or partners who may have had previous bad experiences with loans. It is important to note that not every financial problem you come across requires you to take out a loan. In addition, the interest rates or terms associated with specific loans can be too expensive.

However, if you seek a financial advisor, they might recommend you to take out a loan if you have a good reason to do so. If you aren’t sure where to begin, here are a few situations where a loan can be necessary for your business.

1. If You Are Building Credit for The Future

If you have plans of taking out a huge loan in the future, it is good to start with short-term loans such as monthly installment loans to build up good business credit. One of the most challenging obstacles for start-up business owners is to build trust with a financial institution. Simply taking out a small loan and making reliable payments can put you in good stead and good credit for your business. However, always take out a loan with an objective and not simply because you qualify.

2. If You Are Looking to Expand Your Physical Location

If your business has grown tremendously and you are running out of office space, you might wish to expand or renovate. While your business may be doing well, you may not have enough cash needed for expansion. In this case, a long-term loan can finance your business expansion and a consolidation loan so that you don’t have to keep track of too many payments and loans.

However, you should always ensure that your turnover revenue after your business expansion can pay off the loan and still leave you with something to spend in your pocket.

3. If You Are Looking to Purchase Inventory

One of the most challenging expenditures for any business is the purchase of inventory. Such a move can be difficult for many business owners as the return on investment can be low. During such circumstances, making payment for the inventory on time and maintaining a positive balance on your savings account is the right way to build trust in financial institutions.

If you are operating a seasonal business, you can choose to take a short-term loan such as a quick loan.

4. To Increase Working Capital

Funding the day-to-day operations of a business without cash is impossible. For that reason, you can take out a loan to satisfy daily activities until the day the sales hit a certain volume. If the business owner has good credit and a good business plan, having an option for a second banking institution or licensed moneylender can certainly help out.

However, it is best to be aware that working capital loans are expensive when compared to other types of loans.

Conclusion

Before taking up any loan, always consider whether your business is able to comfortably repay the loan after taking out all of the costs. If the loan does not have a significant impact on your business revenue, you should think twice about whether taking a loan is the best choice for your business. Ultimately, you are the one who decides whether the loan you require will aid your needs.

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