Many people believe that succumbing to lending means that you are not financially stable; however, this outlook in the world of business can be detrimental to sustainability and growth.
There are several positive reasons as to why you might borrow money, and the value you can gain through lending often outweighs the reasons not to borrow.
Here are the most common reasons for lending:
- Growing your team – recruitment is a high-cost exercise and if you do not have the required level of finance available you might put off hiring. By putting off your plans to grow your team, your business will suffer through lack of resource.
- Investing in stock – whether you have just started out, or even if you are an established company creating new product offerings, the chances are that you will need to invest in assets, be it the products themselves or the raw materials.
- Investing in marketing – you may want to invest in a digital agency to boost your business profile, or you may be a ‘one-man-band’ who is bootstrapping – either way, without effective marketing you will not be able to reach new customers.
- Relocating your business – perhaps your current premises are too small, or maybe you need to relocate to another, more visible location. Upfront costs of business premises are often high and without external finance this transition can be difficult.
- Investing in machinery – maybe you have secured new contracts, or perhaps your machinery is outdated. Machinery is expensive, and the chances are that there is not enough ‘spare’ capital to cover the costs. But what if new machinery could improve efficiency and drive productivity? Investing in machinery can be a win-win situation.
Properly planned business lending is a valuable tool to help business growth. However, it must be affordable, and fit with your business’ objectives and model. Therefore it is vital to produce financial forecasts that allow you, as a business owner, to make decisions that ensure the correct finance is sourced so that the investment(s) you make have the required impact.