Small business owners often feel uncomfortable seeking a loan. You may want to do it all yourself, lifting yourself by your bootstraps to succeed. You may want to avoid debt and the interest it brings. Or, you may even find the application process stressful. All of these are valid worries, and keep many people like you up at night trying to decide whether or when to pull the trigger on borrowing money for your business.

Still, while debt can create problems, taking strategic loans can save your business or even help you grow. Every day, small business owners find opportunities with lenders that give them paths to greater success. Before you take one out, though, it is important to understand what you need, what you can afford, and how best to use a loan to your advantage.

How Much Can You Afford?

The obvious first question to ask is what you can afford to pay back. Any time you take out a loan, you will need to make regular payments until you pay the debt and all accumulated interest. You should be able to demonstrate, for both yourself and the bank, that you can afford the monthly payments you will need to make. This is not the time for hanging your approach on hopes and expectations; rather, you should have financial documentation showing that, based on your revenues and your expenses, you can keep up with the payments.

Beyond what you can afford, though, lies a more important question: what should you attempt to afford? Some lenders will push you to borrow as much as their calculations will allow. For that reason, you should approach any loan application with a sense of what you need and what payment is comfortable for you. You should know how much you need to borrow, and what you want to pay, rather than waiting to see what is available.

Timing Matters

This of course brings us to another critical component of getting the best loan opportunities. If you wait until a moment of dire need, you leave yourself at the mercy of the lender. Just like the person whose car dies before he or she starts shopping, you put yourself in a position where it is difficult to say no to any offer. Instead of focusing on the best terms for you, you can only look at who is willing to give you what you need.

To get the best loan for your business, try to think ahead about your needs. Based on your revenues and expenses, you should have a sense if you're going to be short on funds. Similarly, if you are looking to expand, start shopping for the financing you'll need before you commit to a new lease, construction or equipment. Your ideal scenario is to look for financing when you would like a good loan, but can turn down a bad offer. Do what you can to think ahead, and plan for the future rather than tread water in the present.

You Can Meet a Need--or an Opportunity

Too often, small business owners look at a loan as a way to handle a dire necessity. You may want to avoid taking on debt, and even fear the notion of taking on a loan while you are building your business. The truth is, taking a loan when you need it is a sign of strength. Instead of subjecting yourself to additional stress by waiting until the last possible moment, think of the financing as a critical step in achieving your business goals. Everyone faces setbacks or needs some extra help at some point, so responding by finding a loan to help you push forward makes good business sense.

Loans are not just for emergencies though. Just as financing creates the path for many business owners to get up and running, it can also give you what you need to grow: to add a location, to renovate or build on an existing location, or generally to expand your footprint beyond the present. That kind of leap forward requires money, and a loan today can serve as an investment into future growth for your business.

Know Thyself

At the end of the day, responsible borrowing requires you to understand your current position and your needs. Your revenue stream defines what you can afford, but it need not be a static line. Analyze where you are now, and where you expect to be going forward based on your numbers and your market research. The more you can plan ahead for your financial needs, the better your loan options become. If you are ready to address a financial need or grab a new opportunity, Kenmore Capital can help you assess your position and get you the financing you need.


Paul Nemoy
Posted by
Paul Nemoy

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