What is one reason why businesses should pursue a loan for expansion projects?
To help you see the value in acquiring a loan for business expansion, we asked startup founders and business owners this question for their best insights. From lowering overall cost of capital to paying for marketing campaigns, there are several convincing reasons why businesses should pursue a loan for expansion projects.
Here are 10 reasons these leaders pursue business expansion loans:
- Lower Overall Cost of Capital
- Acquire Needed Assets to Move Forward
- Maximize Purchases
- Open a New Business Location
- Weather Tough Economic Times
- Have Additional Space to Meet Customer Needs
- Progress Faster With Your Mission
- Purchase More Inventory
- Get Equipment to Manage Your Business
- Pay for Marketing Campaigns
Lower Overall Cost of Capital
There are a few reasons why a business might choose to pursue a loan for an expansion project. One reason is that by taking out a loan, the business can spread the cost of the expansion over several years, making it more manageable from a cash flow perspective.
Additionally, a loan can provide businesses with the necessary capital to finance an expansion project, allowing them to grow their operations and create new jobs. Furthermore, by taking out a loan, businesses can often secure a lower interest rate than they would be able to get through other means (i.e. the cost of capital through a loan could be a lot lower than if the money were to be raised via equity as example). This can save them money in the long run and help them grow their business more quickly.
Mogale Modisane, ToolsGaloreHQ
Acquire Needed Assets to Move Forward
New equipment and machinery can be vital for businesses in a wide range of industries. Whether you’re looking to update your office furniture, invest in new manufacturing equipment or purchase a fleet of vehicles, a loan can give you the funds you need to make the purchase. New equipment can help improve efficiency and productivity, giving your business a competitive edge. It can also be used to help you enter new markets or launch new products and services.
Demi Yilmaz, Colonist.io
The ideal reason to use a loan for expansion projects is to offer the full breadth of a new product or service. Paying out of pocket for new tools or a new inventory can add up quickly. A loan enables borrowers to maximize their purchases to ensure customers get the full experience of the new feature. This in turn can exponentially grow the customer base by reaching a broader audience overall too.
Kevin Callahan, Flatline Van Co.
Open a New Business Location
One of the best reasons why businesses should pursue a loan for expansion projects is to be able to open a new location for your business in a different geographical area! A key aspect of opening a new business location is to be able to expand your companies reach and brand to new customers! You could use the loan to expand to any nearby town, city, or state of your choosing after doing research. If price is too much of an issue, any location that is relatively distanced from one another can be a huge help! Always make sure to do research before starting this expansion and ensure that this geographic location is a good fit for your demographic. Many places may be quite pricey, but there are many loan options that could help your company in the long haul.
David Ring, MCT – Trading
Weather Tough Economic Times
No business is immune to the effects of an economic downturn, but having a loan in place can help your company weather the storm. A loan gives you access to extra cash that can be used to keep your business afloat during difficult times, whether that’s by covering essential running costs or investing in new marketing initiatives to help increase sales. Many businesses use loans to restructure their finances during tough economic periods, consolidating existing debts and taking out a new loan with more favorable terms and conditions. This can help reduce monthly repayments and free up cash flow, giving you the breathing space you need to get your business back on track.
Todd Saunders, BIG Safety
Have Additional Space to Meet Customer Needs
Having additional space to meet the customer needs is one reason why businesses should look into getting a loan for expansion projects. Financing an extension project can be the best option if your existing location is congested and you’re having trouble meeting consumer demand. This is especially important today, when social distance can safeguard the safety of your employees and clients. You should utilize your business loan to increase your space if your company is doing well. You’ll have more space to serve consumers as a result, which should boost your sales. Using your cash for business growth may enable you to open a brand-new location or pay for an addition to your current location. Whatever the case, your customers will value this enhancement to your offering. Opening a location for your company in a new place is another expansion plan to think about. Customers that live in a town, city, or state that you don’t currently serve will be able to contact you.
Raviraj Hegde, Donorbox
Progress Faster With Your Mission
One reason why businesses should pursue a loan for expansion projects is that it allows them to progress faster. With the money from a loan, you can take care of your debt and get back on track to achieving your vision. It also prevents your idea from being copied by competitors who are better at marketing their products than you are. If you move too slowly and your competition gets ahead of you, they may be able to build up their brand and take over the market share that you had before. A loan for expansion projects helps businesses avoid this fate by allowing them to get ahead of their competition and stay there by expanding at a faster rate than their competitors.
Tiffany Homan, Texas Divorce Laws
Purchase More Inventory
I believe most business owners would agree that keeping costs down is hardest when it comes to inventory management. The catch is that you have to buy inventory before anyone may buy from you. Regardless of industry, stocking up on supplies is a major cost for businesses of all sizes. You need to ensure that you have enough products in stock, and that they are of sufficient quality and quantity, to meet customer demand. This can be difficult because you may have to buy in bulk to make a profit.
Nely Mihaylova, UNAGI Scooters
Get Equipment to Manage Your Business
Before the coronavirus pandemic, most companies were more concerned with expanding their operations than with staying in business. One strategy for expanding a company was to invest in high-quality machinery. Even if a company had been making do with older machinery for some time, the efficiency gains from upgrading were usually enough to justify the initial outlay of capital. A single mechanical failure is enough to completely throw everything off. When essential machinery is down, not only does it cost money, but it could possibly put a company out of business if the losses are too great. Problems of any size can have an outsized effect. It may be necessary to constantly repair faulty machinery in order to maintain them in service. This can quickly lead to a significant loss of resources.
Tiffany Payne, iFlooded Restoration
Pay for Marketing Campaigns
We all know that advertising is crucial to the success of any company, but it’s also true that marketing can be quite costly, making it tough to set aside sufficient funds. All the various promotional channels require financial investment. Advertising, public relations, social media, and search engine optimization are all common strategies. Depending on the specifics of how you decide to carry them out, the costs associated with each of these initiatives can quickly add up. A company loan can be used to fund all or a portion of the advertising campaign, providing you with the tools you need to be successful.
Daniel Foley, Daniel Foley Consultancy