Is Business Lending the Key to Unlocking Your Company's Growth Potential?

In the modern, fast-paced and competitive environment of business, business lending could be the difference between stagnation or growth. Whether for a start-up, looking to scale, or an existing company that is expanding operations, creating a new product, or entering new markets, business lending can be an effective way to leverage your business potential to grow or expand. But how does it all work? And is lending the right solution for your business?

1. What is business lending?

Business lending typically consists of an entity borrowing money for business purposes. There are multiple types of business lending, including, but not limited to: term loans, lines of credit, equipment financing, receivables financing (typically invoice factoring), or Small Business Administration (SBA) loans. Each type of lending arrangement outlined above serves a different purpose and is flexible and adaptable to a business at different growth stages.

As you consider business lending, it is important to understand that lenders, whether a bank, credit union, online lender, or alternative finance company, will look at your business's financial health, revenues equities, credit history, and growth potential as part of the qualification process for eligible amounts for a loan.

2. Fueling Growth and Opportunities

Access to capital is often the most immediate benefit of business lending. Captial can finance growth opportunities, open new locations, hire additional employees, invest in new technologies and marketing. Without a loan or outside financing many businesses could only issue, explore or act on the opportunity of expansion. Often businesses only explore an income stream or product route, etc when the cash is on-hand to take up the opportunity.

As an example, a retail shop that is set to secure a retail loan can expand its business on online platforms and expose itself to wider customers through eCommerce, thus grow sales as a result. Or a manufacturer using funding to replace machinery to produce more and keeping up with increasing demand.

3. Improves Cash Flow and Operational Certainty

Business loans are not always about growth. Business loans can be a great tool for assisting with cash-flow. Many seasonal businesses experience cash-flow issues, despite being profitable over the full-year cycle. Similarly a line of credit or working capital loan might help fill the gaps in running costs such as leasing cost, liabilities, payroll, and inventory in particular during off-peak periods and improve certainty of cash flow to ensure that operational costs aren't an issue no matter the seasons.

Furthermore, readily available working funds allow a business the certainty of being able to react faster when they need to seize opportunities with strategic decision making on day-to-day operational costs, taking advantage of discounts offered to businesses by suppliers, and/or moving forward with ad-hoc or unexpected expenses impacts and commitments on business operations.

4. Retain Ownership and Control

With equity financing, you relinquish a piece of your company; however, with business lending, you keep ownership and control. Yes, you'll need to pay back the loan with interest, but being able to retain strategic independence is worth it in the long run — especially if the funds increase your revenue significantly.

This is why business loans are an appealing option for many entrepreneurs and small business owners who want independence, but require additional funding to grow.

5. Potential Risks & Consideration

Business lending can have many successes, but it also carries risks. Incurring debt also means setting a repayment schedule; which can cause cash flow issues if not properly monitored. Failing to repay debts on schedule can damage your credit rating, limit your choices for future funding situations or in some circumstances put the business you have worked for on the brink of extinction.

This is why you must assess your ability to repay the debt, understand the loan agreement language and make sure you prudently use any funds you procure. Working with financial advisors or lending consultants can help inform these considerations.

6. Is business lending the solution your company is looking for?

If you are interested in understanding if business lending is essential for your company, examine these questions:

• Are you aware of how you plan to use the money and it will generate an ROI?

• Is your revenue stream stable enough to repay the loan?

• Will borrowing money enable you to seize an opportunity that is time sensitive?

If you answered yes to the above questions and you are borrowing the money strategically, business lending can be a significant source of long-term success.

Conclusion

Business lending is not a financial product; it's a tool for strategy, Trinity Consultings helps in businesses. When managed properly it can drive the company regarding profitable growth. Borrowing money for expansion, sales and marketing, preserving ownership, and being competitive brings about an opportunity. Provided you are planning effectively and utilizing the money responsibly, the capital raises new options. If you've accomplished the aforementioned correctly, then business lending may be what stands between you and your company's future growth.