3 Common Reasons for Small Business Loans

Running a successful small business offers many challenges to the average business owner. Starting a small business can be difficult, and there is a smaller margin for error when you’re trying to get your business off the ground. Timing is important, and the ability to take advantage of changes in your market can be the difference between success and failure.

That’s why many small businesses take advantage of small business loans. A business owner may not have adequate liquid assets or funding to seize beneficial opportunities such as buying in bulk at a discount or upgrading equipment or real estate. A loan can give a business owner the instant financial boost to engage in those pursuits without adversely affecting downstream profits. If a business owner can meet small business loan qualifications, a loan can provide an injection of capital that can allow a business to thrive and flourish. Read on to learn a few of the common reasons small business owners seek loans.

Purchase Inventory

Small businesses can take advantage of inventory pricing in the same way that an individual can shop sales and clearance racks to get bargains. In those cases, the business must have the financing available to buy inventory months in advance, which may not be possible without a loan to get the lump sum up front. Also, some businesses are seasonal. For example, if a business sees its highest profits during the holiday buying season, they will want to have adequate inventory at that time to meet increased demand. Buying a large amount of inventory up front may require a loan that can be paid back in installments throughout the season.

Purchase Equipment

Just as a homeowner may need a loan to replace an HVAC unit that fails unexpectedly, a business owner may need a loan to finance the replacement of critical equipment that unexpectedly breaks down. Or, a business can sometimes realize a significant increase in productivity or quality of product by upgrading to newer, more efficient equipment. In those cases, improved future profitability may depend on a sizable investment. Loans allow small businesses to move forward with those purchases without clearing their coffers.

Purchase Real Estate

Small businesses, especially those engaged in retail or service, are highly dependent on location for success. Many upstart businesses will start in more affordable sub-premium locations with the intention of moving to a better location as the business develops. Also, a successful business may need more room or a larger facility to grow and expand product lines. In either case, the need for real estate can lead a business to seek a loan to help finance an acquisition that will increase profits and allow for growth.

For business that can meet small business loan qualifications, a loan can lead to improved stability and greater profitability. That’s why small business owner often seek financing from loans to meet their business goals.

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