5 Reasons Why You

Should Get a Business

Loan
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 5 Reasons Why You Should Get a Business Loan
Page 1

S
ome see borrowing as a necessary evil in a business,
however we believe that’s a profit-limiting mentality.
When used intelligently, a well timed business loan can
create tremendous growth for your operation.
Now of course we must say that not every reason to get a business loan is a good one — the
trick is to know when and how to do it in a way that will help your business make its next big
leap. If you’re wondering when is the right time to make that leap, read on for the 5 smartest
times to get a business loan in Singapore.

To Build a
Reputation of
Good Credit
If you’re just starting out as a business, it
might be hard to think 5 years into the future.
But when that time eventually comes, you’ll
be wanting to take out reasonably large loans
to stimulate growth. However if your business
doesn’t have a good credit rating in
Singapore, you might struggle to get those
loans from local financial institutions.

That’s why we recommend taking out small Make sure these loans are small and most
and frequent business loans when you’re importantly financially manageable, and it
starting out. The benefits are twofold — it will pay dividends for your business in the
gives you a bit of financial flexibility to invest future when it’s time to really grow.
in things like inventory when you’re just
starting, and it also helps you easily create a
reputation for good credit with lenders.
 5 Reasons Why You Should Get a Business Loan
To Buy Business
Equipment
To Buy Business
Inventory
If you sell goods, inventory is an expense you
can’t escape, and unfortunately, you might
not always be in a financial position to afford
it. To make matters more frustrating, you
can’t make a return on your investment until
after you’ve sold said inventory.
Many businesses will have seasonal
fluctuations, for example you might have a
holiday season where business booms, and
you make most of your profit for the year.
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Every business needs to spend money on
things to operate even at a very basic level.
Computers, printers, and office chairs are
simple examples. You might even need large
things like forklifts or trucks for your
warehouse. Either way, business equipment
is a crucial investment in your day to day
operations.
An equipment loan makes even more sense
when you take into account that the
equipment you buy can usually be used as
the collateral for that loan. This means much
less stress in the loan application process as
the lender won’t be so worried about delving
deep into your credit history.
We should note, and you’re probably thinking
about it now, an equipment loan shouldn’t be
about luxury stuff. You don’t need a Mercedes
when a Toyota will do the job. Remember, an
equipment loan is an investment in your
business, not an excuse for lavish purposes.
Stay lean and hungry, and keep your eyes on
the prize.
But if that holiday season is preceded by a
slow season, you may not have enough cash
on hand to purchase the inventory to keep
up with upcoming demand. This means you’ll
need a loan.
 5 Reasons Why You Should Get a Business Loan
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To make sure you are making the right Do note however that sales trends will vary,
financial move, we recommend you take a so be conservative for your sales projections
look at the sales trends for each season as far to help ensure your books stay in the black.
back as your records show. Take a look at how
much debt you’d be taking on, and compare
that next to your projected sales to make sure
you’re getting a good return on your
investment.

You Need to Hire As the owner of an SME, you’ll also be the

marketer, the book keeper, and receptionist.

Staff
But there comes a time that those secondary
responsibilities will limit your ability to be
productive (and therefore profitable) in the
role that you have expertise in.

We know that it can sometimes be hard to

delegate these tasks to others, as after all, you
have high standards for your operation. So
instead, try and look at hiring staff as the
greatest step forward your business has ever
taken in terms of growth. This is an exciting
time, so embrace it.

A loan to cover your new employee’s wages

for a few months will get you up and running
with your expanded team. Sit down with your
moneylender or financial institution to work
out how much value your new employee/s
will bring, and how that will make the loan
pay for itself.
 5 Reasons Why You Should Get a Business Loan
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You Need More

Space
So perhaps by now you’ve hired multiple new
staff members. Things are growing at a great
pace, and things are looking up. However,
this growth has created a problem that has
quickly snuck up on you — you are literally
overflowing out your doors! If your kitchen is
now a storage room and you share your own
cubicle with two other people, it’s probably
time to look for larger premises.

To purchase or even rent a larger physical
space for your business is a significant
expense though, so even if business is
booming, you might not have the funds to
make it happen.
To figure out if this is the right time to move
to a larger location, make a conservative
estimation as to whether your new projected
revenue from the larger space could cover
the loan. The idea of moving up to a larger,
more modern space may be very appealing,
but make sure you’ll remain profitable first.

Wrap Up
It’s fair to say that the reasons we’ve listed here aren’t the only reasons to get a business loan, in
fact there are many other smart reasons to take out a loan. However, one common theme you
will see in all 5 of our reasons to get a business loan is that they are all investments in the
profitability of your business.

In general, if you can afford to pay back a loan that will ultimately improve your bottom line, you
should definitely go for it. However we encourage you to take a long, hard, and objective look at
the reasons for your borrowing. If you are borrowing for the nice-to-haves instead of the
must-haves, you should definitely reconsider your motivation.

Any loan is a calculated risk, so take your time to go over your books to make sure you’ll get a
return on investment from your business loan.
 5 Reasons Why You Should Get a Business Loan

Read our article online at:

https://blog.smeguru.sg/5-reasons-why-you-should-get-a-business-loan

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