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Small-business owners who have never borrowed money are usuallyproud of that fact, but sometimes not taking out a loan can hurtyou.
"Borrowing money is necessary for most growing companies.That's the way small businesses break out and becomelarger," says Tom Kellogg, president of Hartford,Connecticut-based Business Lenders Inc. The company, which hasoffices in Connecticut, Massachusetts, New Jersey, New York andRhode Island, is one of the Northeast's most active SmallBusiness Administration lenders.
A loan can also help companies that have problems paying billsor need to pay off creditors and improve cash flow.
When should you think about seeking a loan? Business Lenders hasidentified nine instances when you should consider a loan. The topthree:
1. You want working capital to add employees, increase long-termsales and generally help the business grow. "Companies cangrow using internally generated capital, but it might be muchslower growth, and they will be exposed to risk for an extendedperiod," says Kellogg.
2. You want to increase your market share. To carve out a largershare of the market, you may need to offer more favorable terms tocustomers and take on new ones who are creditworthy but slow
payers.
3. You want to take advantage of early-payment discounts.Suppliers may offer discounts on invoices paid within 10 daysinstead of the standard 30.
Other reasons to consider a loan are to purchase new equipment,refinance existing debt, establish a relationship with a lender,buy a commercial building or hedge against a downturn inbusiness.
