If you need advice about applying for a loan, be prepared to hear different opinions. Some will caution you against it because there is too much risk involved when you’re borrowing money from the bank. Others will tell you to go for it because honestly, where should you go from here? There are many reasons why you should be applying for a loan. The right reason will tell you when’s the right time to submit yourself and your business to the process.
While it is true that not all reasons are good reasons to apply for a loan, there are exemptions to this unspoken rule. The first thing you have to remember is how confident you are about your products and services. If there is a market for it and if you are somehow lucky enough to have that market all to yourself, then isn’t that a great reason to apply for a loan (yes, even amid a pandemic)?
When You Are Ready to Expand
Business expansion comes in two forms: the expansion of the physical location and the expansion of your product and services offerings. For retail companies, that might mean renting, leasing, or owning a new warehouse. For those in the construction industry, this might mean finally buying a track loader to offer better services to clients and customers. Any expansion plans should only be based on one reason: business is booming, and you are receiving more inquiries about your products and services.
However, a business ready for expansion doesn’t mean more capital. Sure, there is already an increase in demands, but this isn’t translating to profits just yet. You still need a lot of time before your business can feel that the demand resulted in more cash, too.
When You Are Building Credit for the Future
Small businesses usually have a harder time applying for a large-scale loan because of their credit history. This meant that banks cannot trust you just yet because they have no way of knowing that you’re a good borrower. What you can do is apply for a small, short-term loan on which you will make regular and on-time payments. This will show lenders that you’re a good borrower and that they can trust you with a bigger loan.
Building your business’ credit for the future with smaller loans now also means that you’re strengthening your relationship with these lenders. You need more connections for when you are ready for a larger loan. You will usually apply for a loan with the bank that has already granted you one before. Even if you had a late payment in your small loan is better than never having applied and gotten approval for a loan before you apply for the bigger one.
When You Want to Purchase Equipment 
As technology develops, so does the need of your business for more advanced machinery, equipment, and IT tools. These will make your offerings better. However, purchasing new equipment usually means money; this is money you cannot spare. You need a loan to finance that equipment. This is a good enough reason to apply for a loan and hopefully get the approval of the bank.
But before you apply for the loan, make sure that your business is in a stable position. While receiving more orders is usually a sign that your business is doing better, that usually doesn’t equate to a more stable financial capacity. You need to look at the income statement first to make sure you can repay the loan.
When It’s the Busy Season for Your Business
What’s a busy season for your business? It’s the time of the year when you have more demands from customers. For retailers, it’s the holiday season. For accountants, it’s the tax season. Landscapers usually receive a ton of orders during spring and summer. These seasons generate the most revenue for your business.
You need a loan during the busiest season in your business because you will purchase more inventory, hire seasonal employees, afford additional equipment, and pay for holiday marketing campaigns. With no additional funding, these will be hard for any business to accomplish. And yet, businesses cannot be efficient without these during their busy seasons. If they truly want to answer all their customers’ demands, they must meet such demands by empowering their work and operation more.
Applying for a business loan is a big leap. You don’t dive into it without thinking of all the consequences. However, it is also important not to delay any plans to apply for a loan because you’re too scared to take the risk. You might end up short-selling the business.
