Month: January 2017

Business Finance

How Much Should I Borrow for a Business Loan?

It is typically a challenge for a business owner to identify how much they would need when it comes to applying for a business loan. A business is a great way to expand your business and support you through the company’s growth. But before getting a business loan, we may want to consider a few things before diving into the idea of getting extra cash and extra liability that comes with it. Here are a few questions that an entrepreneur needs to consider when it comes to getting a business loan.

  1. Do I have an established plan for the loan?Image result for business loan

It is very important to identify your goal on where you would use the cash acquired from the loan. A plan allows you to correctly identify and create a budget related to spending the loan acquired.

  1. Will the income generated by the loan cover the payments?

You should eventually start earning from the loan. A loan needs to be paid and without generating additional income, the loan would start to become a burden as your liability would increase. It is essential that you are able to project the possible earnings brought about by the loan. This is to ensure that your loan will not become a burden to the operation of the business.

  1. Image result for business loanWhat will my business be doing next year?

You also need to focus outside of your loan and identify what your business will be doing next year. It is important that you know where your business is going to allow you to identify your income and expenses. Knowing your future expenses, you will be able to make decisions if a loan will be necessary to be taken now which will form part of your payment next year.

  1. Do I need a loan now?

Most practical time to take a loan is when you have an answer of “No” to this question. Taking on a loan when you are currently liquid and doing well may mean that you will be able to take on the responsibility of paying your debt. If you are short of funds and business is struggling, it is better to find a solution and have a loan at your back as a last resort.

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