Are you thinking about getting a business loan? Like individuals, businesses also need credit from time to time. The loan comes in handy if a company has cash flow challenges or you need to use the extra funds as a strategic tool to help the company grow.
Although the needs of each business may vary, there are common instances when all companies may need to secure financing. Keep reading to learn the signs that you need a business loan.
1. The Company Doesn’t Have Enough Funds to Cover Employee Salaries
Your employees are the backbone of the company and need their salaries and wages to meet their personal and family needs. Sometimes, the business may not have adequate funds to operate and still pay their employees. This usually doesn’t mean the company is failing or unprofitable, just suffering from cash flow constraints.
Maybe some emergencies have caused a cash flow problem, and the business still needs to stay afloat and cover all expenditures, including salaries. If there is not enough money to cover your day-to-day overhead, you can secure a business loan.
Lenders can provide business loans and lines of credit to meet the working capital needs of your business. Depending on the type of business loan being requested, the turn around time from initial application to funding can be in as little as a week to up to 90 days. Because of the urgency, lenders fund payroll loans more quickly than other business loans. Payroll loans are most typically secured against your company’s accounts receivable. Consider this loan as an option when looking to level out your cash cycles. Many companies experience peaks and valleys in their cash flow that causes stress and uncertainty. A working capital business loan such as this, alleviates the stress associated with cash flow fluctuations.
2. The Business Is Growing Rapidly
Each time a small or middle-sized company experiences rapid growth, more funds may be useful. Rapid growth is often good, but the endeavor can strain your finances before you get the profits. You may get a business loan if you are not ready for rapid growth or the company savings aren’t enough to facilitate the growth expenses. Purchase order financing meets the capital needs in growing companies and is favorite type of business loan. Purchase order financing covers the cost of your orders received from your customers. This type of business loan pays your suppliers covering up to 100% of your cost of goods.
When a company grows fast, you may need money for inventory, expand the business premises or hire more workers. These things can be costly, and you may be in debt if you fail to manage the situation correctly. With a purchase order financing business loan, you’ll get money you need to cover these expenses and ensure the business grows efficiently. The result is adequate capital to meet the demand and an increase the bottom line.
3. The Company Needs Debt Consolidation
Whenever a small or middle-sized company struggles to pay multiple debts, it may be good to consolidate the debts through refinancing. Through debt merging, one may lessen interest rates, reduce monthly payments, and complete debt payments faster.
If you calculate the interest rates creditors charge on your debts and realize they are incredibly high, it is prudent to roll them up in to a new, lower interest rate, loan. The loan will allow you to reduce the interest rates, helping you save the company money.
Also, loans are useful when you want to come out of debt fast or struggle to make monthly payments. Once you combine the debts in one loan, the payments will be easy to manage.
Before you secure this loan, your company will need good credit (and typically above a 620 FICO score for each guarantor on the loan) — this helps acquire the loan at a low-interest rate. In addition, you’ll need to have a adequate debt service coverage to qualify for the loan. Your company’s debt service ratio improves when you refinance your company debt at lower interest rates. Your financial advisor can share tips on handling this process and ensure you get the company out of debt as quickly as possible.
Operating a business without enough capital can be challenging. You will struggle to sustain it, and if matters like rapid growth occur, you may face funding challenges. Luckily, you can rely on business loans to maintain a positive cash flow. At Huntington Coast Capital, Inc., we can help you secure a loan that meets your business requirements and increases the chances of growth. Talk to us today to get a suitable loan for your company.
Call today to see how we can help your business grow, 844-239-2362!