When starting out a business, you may be thinking that the needed capital to pull it up is the only thing that you need. You plan of turning profits back to the company and grow by using the proceeds as funding. The fact of the matter is, many of the expansion costs are much bigger than what your profit can handle. Commercial loans, even when utilized for short term are a vital part of business growth. Let’s look to some major reasons on why you should apply for commercial loans.
Reason number 1. Renting or buying new properties is quite costly – say for example that you have plans to add new locations for existing business, then taking a commercial real estate loan will be best. Banks are expecting this when companies are prepared to expand and that is what making commercial real estate loans as some of the common forms of commercial loans available.
Reason number 2. You have to buy new equipment or, you’re adding equipment to current or for future locations – you might want to lease over buying depending on how long you are planning to keep the equipment. The investment makes sense if it’ll be for as long as or perhaps, longer than the term of your loan. Also, you can take depreciation tax deduction so long as you can.
Reason number 3. You may find that you must add to your inventory – this is true most especially when peak shopping seasons come. You may consider having a short term loan in order to buy your inventory and pay off the loan after successfully dealing with peak season.
Reason number 4. You need a boost to general operating capital – these types of loans can also help in terms of weighing your financial times or to get started. Because these are a lot riskier kinds of loans, the rate of interest charged on them is going to be higher than short term inventory loans or, real estate loan. But when the business requires it, the loan will be very significant and may mean the difference between not making it and making it.
Reason number 5. There’s your vehicle fleet – you may have already started your delivery business using your own car but as you are gradually grow, it is time to start thinking of having bigger cars that’s branded specifically for your firm. Here once again, it may be worthwhile to lease than buying a car, especially if you like to turn in the vehicle every 2 years and have a new one.
Hope that the aforementioned reasons helped you make up your mind to get a commercial loan.
Why Lenders Aren’t As Bad As You Think
Interesting Research on Loans – What You Didn’t Know