Borrowing money and going into debt for your company is a bad thing, right? Not necessarily.
Profitable companies take out working capital business loans all the time when they want to take advantage of an opportunity without hurting cash flow.
Below are just a few specific scenarios in which a successful business owner might take out a working capital business loan.
It can be tempting to take on investors when you need cash to embark on an exciting new business opportunity, but investors often want an ownership stake in your company in exchange for their capital.
If you don’t want to give up partial ownership, control and profits, a business loan would be a better option than taking on investors.
If you are presented with a big opportunity that requires an upfront investment but will pay big down the road, you may want to take out a business loan.
If you don’t take out a working capital business loan you could drastically impact your cash flow and end up in a bad situation despite your best intentions.
For example, recently a large specialty restaurant struck a momentous marketing deal with a local university’s athletic department, but needed $100K within a week to make the deal go. In exchange for his investment, his restaurant would be featured at all home football and basketball games at the university; his business would also be highlighted on all home game tickets, along with coupons that students use at all three of his locations.
If the restaurant owner didn’t take out the working capital business loan he wouldn’t have been able to strike the marketing deal! In this case taking on debt resulted in a major return.
Imagine this scenario: a big celebrity is seen wearing one of your products and demand goes through the roof.
Overnight success like this should be taken advantage of, but unprepared companies can find themselves in a nightmare of a situation.
For example, one small retail store saw demand soar for a particular jacket that an actress was seen wearing around town. Unfortunately their inventory was low and as a result they ended up with a six week waiting list; as you can imagine, customers weren’t happy.
Luckily the company had a line of credit they could tap and they were able to quickly hire additional factories to ramp up production and get the jackets to customers faster than projected. If the company didn’t have the line of credit available, they would have ended up with a customer service nightmare instead of an overnight success.
Similar to working capital business loans, lines of credit can take a while to get approved so it’s best to apply for one before you need it. Here at ARF Financial we can have you approved within 7 to 10 business days, with funds available just 48 hours after approval!
Does your company go through seasonal changes? Perhaps you’re busiest during the summer and things lean out in the winter or vice versa.
Spikes in your busy season are great, but when demand is slow having a financial cushion could be very beneficial. For example, your slow season could be the perfect time to start a renovation project, but you may not have the cash on hand to get started.
A working capital business loan or line of credit could be the perfect option for helping you take advantage of growth opportunities during your slow times so you can increase profits even further during your next in-season!
Learn more about our working capital loan approval and payback process today.