Lately I’ve been writing more about loans and credit. While some financial bloggers are completely against any kind of debt, I strongly feel that there are appropriate times to take on debt.
Today I’ll be covering why you might want to consider a commercial loan for your business.
When you start out on the road to entrepreneurship, you usually don’t have the funds to really get your business idea off the ground. So do you put your idea on hold while you save up for years? Do you start your business with bare bones structure with little chance of success?
No, you most likely go to your bank and try to get a loan to cover any start-up costs. That way the business you envisioned can truly take form. Your business can blossom and start bringing in profits as soon as possible.
In some industries, sitting on your idea too long could leave you too far behind your competition. Sometimes you need to get your foot into the market before others can build up domination. Waiting too long could kill your potential success.
Or there are times when your existing business desperately needs upgrades or has other funding needs in order to keep up with the competition. What do you do when some crucial machinery of equipment needs replacing? Well ideally you have cash flow to deal with those scenarios but that is not always the case.
The key with commercial loans is that you have a solid plan to pay the money back and in a timely manner. If there is a large degree of risk whether the business will pan out, you might want to rethink how you are going to finance your business. The bank will likely want to make sure you will be able to repay the loan too. Another option to consider is looking into accounts receivable loans where they will give you advanced funds based on your account receivables which will not be that big of a risk.
Personally I have off and on considered starting some kind of offline business. My thinking was that there must be various businesses with enough slack time to also manage my online business concurrently. I never thought it through enough to find a really good idea, but if I had, I would’ve eventually come to the need to take out a business loan.
One day I may still pursue starting my own offline business, but for now I will keep building up my online business. It’s inexpensive enough to start an online business that I can run it with minimal risk. Then as a I build up that business, I might later come up with another business idea that appeals to me.
In the meantime I still can get financial help from my bank. There are various business accounts that I could use to better manage my business finances. Currently all of my finances go through my personal accounts, but that just creates an accounting mess. Things would be so much simpler with a separate account for business transactions.
You can read more good debt in my post about why personal loans aren’t always bad debt.
Have you ever used a commercial loan? Do you have a business bank account to handle your business finances?