Small business owners are generally in desperate need of money, which is why they look for business loans. They need money to run their business and may be even to be able to rent a home!
In the financial world, the rule is actually quite twisted but simple. You should look for a loan when you really don’t need it. In desperate times, people actually don’t want to give loans. When you are quite settled, they don’t mind loaning you some money. This is mainly because when you are settled, they know that you will be able to pay them back. Most small business owners make the mistake of only concentrating on their present situation and completely ignoring what may befall them in the future. Just because your situation is stable at present, does not mean it won’t change in the future. The terrible recession has taught this important lesson and the sooner you grasp it the better for you.
The Right Time To Borrow
The right time to apply for a business loan is when your business is steady and is doing quite well. When you have steady income, banks will be more than willing to give you money. In fact you will have various options to choose from. Set up a line of credit and that will enable you to stay sane even when you have financial instability in the future. Of course you may need to incur a few expenses for the line of credit but it is very handy and you will have to spend only when you use it.
Basically, growth and a clean credit score will make things very easy for you. This is because banks will be confident (just like you will be) that you can pay the debt off without hassle or ado.
The Wrong Time To Borrow
If you don’t follow the above advice and wait for things to go bad before taking drastic measures you will find yourself in a pickle. In desperate times, people will actually back off and banks will be highly unwilling to lend you money because they can’t be sure that you will return the money on time. Thus, bad times are the worst times to look for loans.
Prevention is better than cure is what experts say in this case. Get ready for uncalled for circumstances when things are running smoothly and you will be prepared.
If you want to borrow money you should do it when things are looking great because when things go bad banks will be highly reluctant to loan you any money. Thus, bad times will get worse very easily.