Running a business requires a lot of money — that much is obvious. But where does that money come from? While some business owners can fund their business using their savings, that’s not realistic for many people. Financing your startup business with a loan can provide you with the means to grow your business more quickly than you would be able to without the extra cash. As the saying goes, “you have to spend money to make money.”
Where you get the money is up to you — be it from investors, startup business loans, crowdfunding or borrowing from friends and family, but the fact remains that some form of financing is necessary. Every business is different and therefore has different needs and goals but the basics are always the same. Financing can help you get the basics down early and promote fast growth that will allow you to repay your loans in no time.
Here are a few of the most important reasons you need financing to run a successful business:
Taking out a startup business loan will allow you to maintain more control of your business than you’d have with other methods. If you took money from an investor, for example, they will likely require you to give up a certain percent stake of the business to them in exchange for their financial assistance, maybe even the majority stake. Others will require that you pay them royalties on each unit sold, which can add up very quickly. If it’s your business that you have worked so hard to establish and get off the ground, why would you want your profits going to anybody else other than yourself?
When you take out a loan, you will be able to maintain full control over your shares of the company and any profit that you may earn. By controlling all the profit, it will be easier for you to pay back the loan once your startup really gets going without sacrificing control of the company to anyone else — after all, this is your business. Seek Capital, for example, can provide you with the small business loan you need without sacrificing your stake.
Getting a startup business loan will also allow you to expand your business if that is what you want to do. Having the extra money can help you develop new products or services for your company. It could also help you afford to open a new location if your current location is too small or if there’s substantial demand for an additional location. Not being able to expand your business is a constraint that you definitely do not want to deal with as it could be detrimental to the company. Financing is a great tool to use in order to expand when you need to without worrying if you have enough liquidity available to do so on your own.
You might feel like you are doing it all as a business owner. This can easily leave you overwhelmed by all the different tasks and responsibilities that can stack up quickly, especially when you have to handle areas of business that aren’t your expertise. Especially when your business is growing, it can be hard to handle all the work that needs to be done on your own.
Bringing in staff members to handle things that you no longer have time for can be a lifesaver — but employees are expensive and will require benefits in addition to wages or salary if they’re full-time workers. Furthermore, the more your business grows the more likely you will have to outsource certain tasks to outside companies or freelancers and pay them for their services instead of doing it in house. Things like marketing, accounting and bookkeeping are hard for one single person to do when a business really gets off the ground. By having enough cash on hand to cover hiring additional employees or services, you can ensure that your startup will continue to operate successfully and efficiently.
Related: 1099 vs. W-2 Employee —What’s they Difference and Why Does It Matter?
It’s no secret that inventory is extremely expensive to acquire. Oftentimes, you will need to purchase inventory ahead of time to make sure that you can meet the demand. To do so, you’ll need to have enough liquidity to cover the cost of this new inventory before you see a return on your investment. This can put you in a really sticky spot; your business absolutely needs inventory in order to be successful but what if you can’t afford to replenish your inventory? Financing options come in especially handy in these situations and allow you to meet the demand for inventory without worrying about the upfront costs and just focusing on the quick return that you will see from your investment, which you can then use to pay off your loan and reap the profits.
Equipment is also another big expense that certain types of small businesses often struggle with covering on their own. Equipment is really one of those areas where you must spend money to make money. Not having efficient equipment can really hurt your business and drive away customers. Investing in equipment through financing is a really solid investment. However, it is still important to make sure that you are not buying overly expensive equipment that you don’t really need. You need to really examine your needs before purchasing new equipment to make sure that you don’t go overboard looking for that state of the art technology.
Good marketing is vital for any successful business. People need to know that you exist in order to utilize your services. Financing can allow you to launch a marketing campaign that will bring in customers and increase sales and profits quickly. Marketing is also another solid investment that will allow you to see a high rate of return. Like equipment, it is still important not to overspend on marketing, especially in the digital age where traditional print and television ads are pricey and may not be effective for your audience. You will find that you can get a lot of bang for your buck through digital marketing on the internet and social media. Make sure to use this to your advantage and really get the word out about your great new company.
The Bottom Line
Money is a necessity if you want your business to succeed. Where you get that money and how you use it is up to you. Whatever you decide, make sure you evaluate all your options and make the right choice for your unique situation.
More From Seek
- How to Leverage Financing Today to Grow Your Business Tomorrow
- 7 Fears Entrepreneurs Need to Overcome
- SBA Microloan: What Is It and Is It Right for Your Business?
Business Loan Resources
Photo Credit: Pla2na/Shutterstock.com