7 reasons to apply for financing when your business is doing well

Financing isn’t just for struggling businesses. Of course, a business loan can help you recover from a crisis or maintain operations when cash is tight, but financing also fuels your business’s growth. 

More and more business owners are embracing small business financing as a tool for success, instead of just using it as a last resort. According to a 2021 survey from PayPal, 70% of small business owners said the pandemic has helped eliminate stigma around seeking business funding. Of those respondents, 37% said they’re planning to apply for a business loan in the next year. 

Here are some signs it’s the right time to invest in your business’s growth: 

• Market demand for your products or services has increased significantly.  
• Your profits or revenue have been steadily increasing.   
• Your customers or clients are asking for more. 
• You have an exciting opportunity to change or expand your operation.  
• You want to be more competitive.  
  

7 reasons to take out a business loan 

A business loan lets you increase your working capital without sacrificing your cash flow. To support your bottom line long-term, though, it’s crucial to use your funds to increase profits and solidify customer loyalty. Here are just a handful of ways to do that:

1. Buy new inventory

If you run a product-based business, inventory is what keeps your operation alive. Not only do you need enough inventory to meet customer demand—you also need to be ready to adapt to seasonal trends, changing consumer habits, and fluctuating inflation levels. 

Depending on your customers, market, and products’ shelf life, you can use a business loan to:

• Bulk order inventory to get a discount. 
• Stockpile customer favorites in case demand increases. 
• Purchase new items to keep your rotation fresh. 
• Pay for upfront inventory costs ahead of a busy period. 

2. Invest in marketing

Smart, consistent marketing keeps businesses relevant and financially stable. You may already have a base of loyal customers or clients, but the right marketing initiatives can help you expand that base—or target a new demographic altogether. Every business can benefit from more marketing help, but it’s an especially smart investment if you want to update or solidify your brand, attract customers from a different demographic, bring new life to your current marketing campaigns, or get a greater ROI from your marketing strategies. 

You can use a business loan to invest in: 

• Marketing software (like HubSpot or Adobe) to create content and track engagement
• A new marketing employee, like a social media director or digital marketing executive  
• A marketing agency to develop a comprehensive marketing plan for your business
• Hiring independent graphic designers, video creators, and copywriters to make infographics, create video content, and write compelling ads and emails
• A web design agency to revamp your business website to drive traffic

3. Move locations

Using a business loan to move locations can benefit your bottom line. If you’re looking for new customers, for example, you might want to move your storefront to an area that gets more foot traffic, or go somewhere where there’s less competition for your business. 

On the other hand, if you want to attract employees, you may want to move to a more desirable building or an area where the cost of living is more reasonable. You might even want to nix your brick-and-mortar workspace altogether in favor of going fully remote. 

Whatever your reason, a business loan can give you the necessary funds to:

• Purchase or rent a new space. 
• Pay for packing suppliers and movers. 
• Update business materials. 
• Launch a marketing campaign to inform customers. 
• Cover lost business or productivity during the move. 
• Give employees a paid day off or stipend for the move.  

4. Adopt new technology

Technology is key to staying competitive and profitable in an ever-evolving world. Digital tools and options have become especially critical since the start of the pandemic. Eighty-eight percent of consumers expect companies to accelerate their digital initiatives, according to Salesforce’s State of the Connected Customer 2020 report. 

Not only can technology help you meet customer demand—and attract new customers—it can also improve your operational processes and business spending. You can use business loan funds to: 

• Upgrade your inventory management software, payroll software, point-of-sale system, or customer relationship management software. 
• Build an online customer portal. 
• Integrate your business website with software that improves the customer experience (think: by simplifying the checkout process or letting customers fill out RFQs). 

5. Hire

Using a business loan to expand your team can set you up for long-term growth. If you and your employees have too much work to handle (despite making operational improvements), or if you need to add a new role to modernize your business, you’re probably in a good position to hire. The right hire will either bring money into your business directly through sales, or play a vital role in your business’s day-to-day operations or big-picture goals.  

With a business loan, you can cover: 

• The costs of online job postings 
• The time needed to find and interview candidates
• Paid employee training 
• An employee’s salary and benefits 

6. Add a new service

Adding a new service to your service-based business has the potential to help you secure customer loyalty, improve revenue, and attract new segments of your target demographic. It’s a good idea to introduce a new offering if customer demand is increasing or if your market is changing. 

For example, if you run a car wash and want to cater to a wider variety of customers, you could start offering oil checks as another service. On the other hand, if you own a web creation boutique and want to establish yourself as an expert, you could start offering specialty services like graphic design or SEO. 

There are a few different approaches: 

1. Add a service that your customers have been asking about. 
2. Add a service that lets you build a niche. 
3. Add a service that breaks you out of your niche. 
4. Add a service as part of a rebrand. 

7. Expand your product line 

Developing a new product can bring in more customers and keep sales steady. You may want to enhance a customer favorite, experiment with ideas to match consumer trends, or create a product that lets you enter a new market. 

Regardless of your goals, funding can help you get there. You can put the money from a business loan toward:

• Conducting market research
• Purchasing materials and supplies 
• Hiring vendors or contractors
• Developing a prototype
• Paying for certifications and testing
• Designing your packaging 
• Production batching and minimum orders
• Covering shipping costs
• Launching a marketing campaign
  

 4 steps to take before applying for a loan

Before you apply for financing, take the time to do the following: 

1. Clarify your growth goals: Write out your business goals in specific, realistic terms. From there, you can decide whether or not business financing would help propel you forward. 
2. Crunch the numbers: Figure out how much money you’d need to achieve your goals, whether it’s $50,000 or $500,000. Carefully add up each estimated cost, and be sure to pad your budget in case you run into problems.  
3. Assess your business financials: Go over your business’s profit and loss statement, cash flow statement, balance sheet, and sales or cash flow forecast to see what kind of financial shape you’re in. It’s also helpful to calculate your business’s debt service coverage ratio to see if you’re in a position to take on debt. 
4. Research your financing options: Start looking into different lenders and loan types—from online lenders to banks—to see which one works for you.  

If you want to grow your business without tying up all your cash, consider applying for a Funding Circle term loan. Our business term loans let you borrow anywhere from $25,000 to $500,000 for growth projects of all kinds, with repayment terms ranging from six months to five years. Apply today or check out our FAQs to learn more. 

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