Congratulations—your almost through the end of 2018. In fact, you’re probably making plans for what you want 2019. That might mean expansion, additional staff, a new office phone system, more inventory, or taking your business to the next level in some other capacity.
If you’re looking to do any of the above—and you’re like more small business owners—you might not have the kind of capital to reinvest in your company. That’s where small business loans could come in handy.
There are a ton of great reasons to consider business financing in 2019. Knowing whether or not you need it, however, can be a little more challenging if you’re new to loans and lending. Here are a four signs that you’re ready for business funding in the coming year, as well as some tips about what kinds of loans might work best for you.
#1. If You Need to Expand Your Business
Building out the next phase of your business is an exciting prospect. Figuring out how to pay for it? Not so much. It’s much easier to know when it’s time to expand your business than it is to figure out the financials of how business expansion might work.
You might be ready to expand your business if you’ve been profitable for the last three years or more, you have a business opportunity in a new town or second location, or your industry is growing. These are all great indicators that you’re ready to take on a new opportunity, and that business financing might be a good option.
Business loans can help you grow your company by providing you with access to the capital you need to buy real estate, buy more equipment, or give you access to cash over a specified period of time. Long-term loans are great for investing in big-ticket items, such as a new warehouse or storefront. Equipment loans can help you pay for the machinery you need to produce more goods without requiring collateral in exchange. And a line of credit can help you pay for the one-off expenses that invariably come along with any expansion process.
#2. If You Need to Seize an Opportunity
The hardest thing to do as an entrepreneur is to turn away business. But if you don’t have enough cash to accommodate a new client or a big purchase order, that might be your only choice. Hopefully this didn’t happen to your company in 2018; but if it did, you might want to consider your business financing options in 2019 to keep it from happening again.
Short-term loans can go a long way here. These loans differ from long-term financing because they’re much easier to get (most lenders have lower credit history requirements), give you money faster (some within the same day, even), and provide you with enough cash to free up the liquidity you need to accomplish your objectives. A line of credit may also help you here, although you’ll need to plan ahead since the application process is longer and credit requirements are stricter
#3. If You Need to Stabilize Your Cash Flow
It’s hard to plan for the future when your clients and customers pay invoices on an irregular schedule, or are subject to different invoicing terms. You can only forecast so far into the future if your cash flow bounces around throughout the month—and forget about being able to look a year into the future. If this was the case for you this year, make an early resolution to get your money on a regular schedule.
One of the best ways to do this is through invoice financing. Invoice financing is as cash advance that provides you with 85% of the sum of your invoices as a lump-sum payment. Your lender holds onto the remaining 15% until the invoices are paid in full, at which point you receive the rest of your money. You’ll pay interest while your invoices are outstanding (in addition to any terms and fees), but you’ll also get the cash you’re due without having to wait until your clients pay.
#4. If You Want to Consolidate Your Existing Debt
Many small business owners have taken on some kind of loan for their company in the past. In fact, 73% of small businesses take out debt within a 12-month period, which means that there’s a strong likelihood that you may have borrowed in the past if you’ve been in business for a while.
If your company has one or several existing loans, consolidation might save you money by lowering interest rate on your debt. Refinancing takes your existing loans and rolls them into a singular, all-encompassing loan. This is a particularly helpful tactic if you’re locked into high-interest loans, and can get a better rate through consolidation. Be careful that you don’t end up paying off your refinancing loan for a longer period than your existing loans, though, because they may end up costing you more money this way—even though the interest rate is lower. It’s also important to understand whether your loan comes with any prepayment penalties that could affect your bottom line.
No matter where your company is at the end of the year, you’re ready to go into 2019 strong and focused. Better yet, you should also go into the new year prepared with a strategy to take on whatever comes next. Whether that means growing your business, seizing new opportunities, or taking care of old debts, business financing might be the right move for you. Regardless of where your business is, the best time to start planning for 2019 is right now. Create a strategy, weigh out your business financing options, and go into 2019 stronger than ever.