Don’t Put The Cart Before The Horse:Be Strategic About The Loans You Secure

You have to have a plan of action before you secure a business loan. Loans are going to take time to pay off, even if you’ve got such a plan in place. But if you secure loans, pay them back on time, expand your business, and source the capital to make it so your organization is approved for larger loans, everybody wins.

In order to do this, you don’t want to "bite off more than you can chew", as the saying goes. You’ve got to get a regular stream of income pouring in, then ensure that regular stream can be maintained over time. Ideally you’ll have an upward trend. Because of things like inflation, it’s not possible to keep profitable—realistically—without expansion.

Expansion comes from growth. It’s an upward spiral. The more you make, the more demands for your products and services. The greater the demand, the more employees you’ll need. The more employees you have, the greater the cost of operation. This predicates a need for greater expansion, and requires more infrastructure.

If you’re expanding proactively, there may very well come a point where in order to reach a certain goal, you require an asset influx that won’t come "naturally", but must be organically sourced through a loan of some variety. When you hit that event horizon, then it’s time to acquire a loan, or a line of credit. Additionally, you’ll have more options.

A startup business line of credit rate comparison helps identify the best credit solution for your business, but you’ve got to have good credit to have multiple options; according to BusinessLineOf.Credit, "Creating a strong business with an outstanding profile doesn’t only help with securing a loan; it’s also crucial when attracting new customers."

Advancing From A Position Of Strength

When you’ve made it to the point where a loan is advisable to maximize and stabilize your outward expansion, you’ve likely built a strong business whose profile is amenable to the acquisition of either an actionable business loan or line of credit. You’ll be able to get new customers and increased profit margins.

Now the flipside of this is obtaining a line of credit or a loan too early. If you "jump the gun" here, it’s very likely that in order to keep your business from complete collapse, you’ll be required to downsize. That means letting off departments, liquidating employees as well as assets, and pulling back to original service areas.

If you have no competition, then you can afford to downsize and tread water a while until you’ve rebuilt your reputation in a financial sense, and can sustain another loan. But you will lose time. So the key here is not to jump in the water too soon. Breathe a bit, psyche yourself up, then dive in those icy streams.

The Relationship Between Marksmen And Bodybuilders

Another way to think of it is to consider target practice. A marksman starts with near targets and eventually has so refined their craft that they’re able to hit targets which are further and further away. Or consider the bodybuilder. They don’t jump onto the weight bench and try for the highest lift; they work their way up and build muscle as they go.

So perhaps what makes sense is taking out a number of small loans for itemized purchases, paying those off, and gradually building up both your affluence and strength such that you understand what you’re getting into, and can properly sustain the load of a big-time loan, or a continuous line of credit. Also, be sure and continuously utilize all assets at your disposal. Don’t forget to factor in tax credits!

Dan Sears is a writer, editor, blogger by the day and an avid gamer by the night