If you have a business then you will probably find that if you want to expand then you will need to borrow money in order to do so. A business loan is a way that you will be able to do this but it is worth thinking hard about whether it is the right move for you and your business.
Complete a business plan
you will need to put together a business plan to show the lender like Emu.co.uk so that they will be able to see that you will be capable of making the repayments on the loan. However, it will be very tempting to make it look very positive so that you have better chance of being accepted. It is a good idea to also think about the worst case scenario or what might happen if business does not quite go as well as you had hoped. This sounds negative but it is wise to just think about how you might cope if things do not go as well as you had hoped as this will allow you to make plans just in case or you may even decide that it is not the right time for the loan.
Check if profits will increase
Business expansion will often lead to more expenses perhaps needed more space staff, stock or things like that These things all cost money and so it may that you will be spending more as well as selling more. It is really important to make sure that you are not increasing your spending and your income by exactly the same amounts as this would mean that your profits would stay the same. If this happens you will be busier but you will have nothing extra to show for it. Therefore think carefully about whether this is really the direction that you want to go in.
Consider workload and stress
It is also important to think about the increase in workload and stress that could come about as a result of you expanding the business. It could also bring more profit but you will have to think about whether you think that the extra profit is really worthwhile if you are finding things really stressful. So have a think about all of the extra things that you will need to do and whether you think that it will be worth it considering how much extra you think that you will make. It is easy to think that if you are your own boss then there will be no stress but this is not true. You have to make all of the decisions and bear the consequences of them and this can be extremely stressful. You may have staff relying on you to make enough money to pay them and this can be a huge responsibility.
Think about the repayments
It is really easy to forget about the importance of being able to make the repayments on the loan. However, your business does each month you will still need to make sure that you cover those repayments. This could mean that you might have to be reaching into your own pocket if you have a month that is slow and does not bring in enough money to cover it. Therefore you will need to be confident that you will have enough money to cover the loan repayments just in case the business does not. Ideally you will have a business savings account where you will keep extra money that you make each month so that you can use it the following month if takings are low and you need extras to cover the bills. Of course, this might not be enough so you need to be prepared to cover the extra if necessary.
So there are lots of things you need to consider before taking out a business loan. It is great to be positive but you need to make sure that you are prepared for the worst to happen as well and that you have a backup plan for repaying the loan if the business does not make enough to cover it. You also need to make sure that the investment will increase your profits significantly. Also consider how much extra work and stress it might create and whether any increase in profits is worth it. Lastly make sure that you will be able to afford the repayments if the business struggles to pay.
It can seem an easy decision to just take out a loan but you need to think carefully about it. There are often consequences that are not clear before we take it out and these can have a negative impact on the borrower. Therefore make sure you think very carefully and imagine how you would cope if the worst happens so that you are fully prepared.