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What Are the Reasons Small Businesses Seek Financing?

While in an ideal world no business would ever have to seek financial assistance, that is not a reality, especially in today's economic climate. It is common for small businesses to find themselves in need of financing for a variety of reasons.

  1. Expansion - Expansion generally happens if a business is turning a profit, has a rising cash flow, and has positive forecasting numbers for the future.

  2. Purchase Equipment - Businesses have two choices when if comes to equipment: they can buy it, or they can lease it. If a business owner borrows money to buy equipment, they can take a tax write-off and depreciate the rest of the equipment over its economic life. The equipment can also be sold for salvage value when it's outdated or no longer functional.

  3. Increase Working Capital - Working capital is the money used to manage day-to-day business operations. Small businesses may take out a loan to satisfy operational costs until their earnings reach a certain volume.

  4. To Build Credit - Taking a business loan or business credit card presents you with an opportunity to build business credit. Even if you only take out a small loan, every payment you make on time helps build your credit and strengthen your case for a better loan the next time around.

  5. Recruit New Talent - Many businesses start off as one or two-person operations, but if your business expands you’ll eventually reach a point where you need assistance. Payroll can be the largest and simultaneously most necessary expense for small businesses.

While these are just five of the many reasons small businesses choose to take out loans, there are many other valid reasons to seek financing. If you believe your business needs to take the next step, you can get the process started in less than five minutes. Download the Lendtek mobile app on the Google Play or Apple app stores to explore your options.

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