When we think of borrowing, we tend to automatically consider our personal finances. We think about credit cards that we might have taken out in our name. We consider loans that we might have signed up to. We mull over financing agreements taken out on cars, appliances, and other expensive purchases. But it’s important to remember that you can engage with borrowing on a professional level associated with your business too. Just as you can run short of funds in your personal life, you can run short of funds in your professional life. Just as you might benefit from engaging with borrowing in your personal life, you can benefit from borrowing in your professional life! Believe it or not, many of the rules of finance that we have followed in our day to day lives up until the point of becoming a small business owner can also be applied to running our company effectively. Let’s take a moment to consider the benefits of borrowing for your small business and why you might like to engage with this process!
Shutterstock Licensed Photo – By FGC
Starting Out in Business
If you are in the early stages of setting up a business, you are probably well aware that this is an extremely expensive process. Sure, you might have a great product concept that could make a fortune when presented to the consumer market. But this isn’t enough alone. You need to be able to bring your ideas to life and actually have them on offer for people to buy! This involves forking out for a whole host of processes, including:
- Product Development
- Market Research
- Creating Prototypes
- Product Testing
- Mass Manufacturing
You then need to be able to let the consumer market know that these products exist and are available for purchase. This means forking out for:
- Marketing Campaigns
- Advertising Campaigns
Finally, you will need to create a space where customers can actually process transactions and generate profit for you. If you are operating in a traditional brick and mortar basis, you are going to have invest in:
- A Commercial Property
- Commercial Energy
- Furnishing
- A Point of Sale System
- Surveillance Equipment
- Employees and Security Staff
If you are going to opt to sell online, you will need to pay for:
- A Domain
- Web Design
- Professional Product Photography
- Written Content
As you can see, starting out really doesn’t come cheap. Unless you have a pile of savings to fall back on, you may feel that starting out in business is a far-off dream. But if you really believe your product can sell, it may be worth borrowing money to get your venture off the ground. If you experience success and your product does begin to sell, you can use your profits to pay off any money that you owe and you’ll have kickstarted a flourishing business.
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Expanding
Once you’ve established your business and have found a market for your products or services, you may want to expand. Now, generally, business owners will use profits that they are generating in order to do this – they will reinvest in the company. But if you have another innovative idea for a new line of products or a new service and don’t currently have the money to bring it to reality, you might not want to wait. You are likely to want to strike while the iron is hot and offer customers who are already showing interest in your brand with something new. Waiting until you have sufficient funds readily available may mean that customers’ interest has dwindled and you will end up working out a small fortune on new marketing and advertising campaigns to reignite their interest. Borrowing can allow you to make major changes and developments before your own funds are quite there.
Covering Unexpected Expenses
Your business may be ticking over fine and well and you may be generating a good profit. But you need to remember that unexpected expenses can strike at any time. Your manufacturing equipment might break down and need to be repaired or replaced. Your commercial premises might be damaged and need sprucing back up. Your company car might need a little work done on it. If you have savings, you will be fine. You can have everything back up and running as it should be in next to no time. But if you don’t, you can find yourself in an extremely difficult situation. Waiting until you have sufficient money to pay for this work to be carried out outright can impact your business’ profits. Instead, you could take out a loan with a company like www.IrukaCapital.com and have the work carried out immediately. Things will keep on track and you can continue operating and making sales. The profit that you generate can then be used to clear your debts. This benefits you and your customers and can prevent your professional reputation being tarnished or your company’s reliability being questioned.
Boosting Your Credit Score
Remember that your credit score is important for your business as well as your personal life. You don’t want to face any of the above situations only to find that you don’t have an existing professional credit score (as you haven’t previously engaged with borrowing) and that lenders and credit companies aren’t willing to risk lending your money. You should make sure that you are always engaging with some sort of credit scheme in order to prove that you can be trusted to pay money back on time and as agreed. This means that if disaster does strike, you’ll easily be able to source the necessary funds to fix things and get things back on track as quickly as possible.
As you can see, there are plenty of situations where borrowing can benefit your small business in the long run. Just make sure to be sensible with your borrowing and to only ever take a sum that you know you are able to pay back in full as agreed. This will prevent you from slipping into debt!
