Whether you are starting up a new business from scratch, or are looking for some extra cash flow in your established business to help expand, there are so many different reasons for taking out a business loan. Before applying for a business loan, it is important to have a clear goal in mind. You need to understand where the funds are going and what you hope they will achieve in your business. There are different types of business loans available, depending on these differing needs. So, what can business loans be used for?
What Is A Business Loan?
A business loan is exactly that, a loan that is taken out for your business. There are a number of different categories of loans to choose from. These include:
- Secured business loan: this requires offering up a piece of collateral against your loan. This has the added benefit of making it easier to take out a loan, while also getting you a cheaper interest rate as you aren’t considered as much of a risk.
- Unsecured business loan: On the flip side, an unsecured business loan is one where no asset is offered up. These loans can be harder to take out as you are considered more of a risk to the lender. They also usually come with a higher interest rate.
- Term loans: these loans are good for a specific period of time. This could be a few months, a few years, or any agreed-on period with your lender.
- Accounts receivable loans: this is a very specific type of business loan. If you have accounts receivable pending, then you can take out a short-term loan that will tide you over until you can collect payment. When the money comes in, you can pay back the loan.
- Personal loan: if your business doesn’t have a borrowing history or any credit, it can sometimes be easier to take out a personal loan to put into your business. Of course, this means taking on the risk yourself and if it doesn’t go to plan, your credit score could be affected.
But what can business loans be used for?
What Can Business Loans Be Used For?
Business loans can be used for a large variety of purposes, it is about ensuring your reasons for taking one out are the right ones. For example, taking out a loan to buy something new for the office, just because it looks good, probably isn’t the best reason. Here are some of the useful things to consider when asking “what can business loans be used for?”:
- Starting a new business: it’s no secret that the start-up costs for a new business can be very high. From setting up an office to hiring staff and investing in a product, there are many expenses that need to come out upfront. A business loan can help you through this initial period to get you on your feet and the money to start coming in. Once you start generating this revenue, you can pay back the loan.
- Expansion: once your business is established and operating well in an area, you might consider expansion. Just like setting up a business from scratch, you need a lot of capital behind you when it comes to expanding your business. Whether you are looking at another city or another continent, a business loan can help you crack into these markets.
- Gain credit: when it comes to taking out a loan, good credit history is important. It can actually help to take out small business loans from the beginning to build up your credit history, so when the time comes that you need to borrow larger amounts of money, you have a better chance of securing a loan with a good interest rate. You have already proven you will pay it back on time each month.
- Equipment: it’s often the case that a business needs to invest in new equipment. This could be to make processes run more efficiently or to upgrade outdated systems and equipment. You are better off taking out a loan and investing in something that will last for the long-term, rather than opting for a cheaper option that will need to be replaced in time.
- Business opportunity: you never know when a great business opportunity might present itself that you want to capitalise on. It’s important to do your research and work out just how worthwhile this opportunity is before going down the process of getting a business loan.
Finding The Right Help
If you are looking to take out a business loan, then be sure to find the right lender for your needs. By shopping around and getting the best expert advice out there, your business will be set up for success. The team at ALC Commercial has your best interests at heart and will look at your individual circumstances. Give us a call today to get started.