To borrow money, or not to borrow money? It’s an important question and, if we’re being honest, there really isn’t an easy answer. It totally depends on your unique situation.
But there is good news: this blog will give you the tools you need to make the decision with confidence.
We’ll explore the question, “when is the right time to seek outside funding?” and how to go about it once you’ve decided that an injection of capital is definitely necessary.
Let’s get started!
When to Borrow Money for Your Business
Is now the right time for your company to borrow money? How about next year, or the year after? To know for sure, you have to look at the two primary reasons businesses accept outside capital in the first place: they need it to keep the lights on, or there’s an opportunity they want to take advantage of.
Let’s drill down into each of these reasons.
Evaluate Your Need
How badly is your company in need of funds? Take a realistic look at your situation and evaluate it honestly. This is an important first step. You need to tread carefully and proceed with caution.
Ask yourself what the next few months will be like if nothing were to change. How would your outlook shift if you got a loan? Digging deeper, how big of a loan would you need to remedy your current money issues?
Once you have a figure in mind, you can assess how long it will take you to recover and what terms you’ll realistically be able to afford in the meantime.
Does that seem like a lot of questions? Well, we’re not done yet. To accurately gauge your need for funds, ask yourself what other solutions are currently being implemented to solve your cash problems. Will an injection of capital assist those measures?
By answering these important questions, you should be able to come to a conclusion on whether or not your current need for money is strong enough to seek a loan. If it’s not, you need to rethink your strategy.
Evaluate the Opportunity
As a business owner, you’re likely ambitious by nature. You see an opportunity and you want to capitalize on it. But what if you don’t currently have the funds to do so? A business loan may be worthwhile, but you need to thoroughly investigate the situation.
Ask yourself these important questions:
- Will this borrowed money generate more money? If so, how much?
- What are my margins and is there any potential for unforeseen costs?
- How quickly can I make this happen and what might stand in the way of my business borrowing capital?
After answering these questions, you’ll be much more prepared to answer the question, “Does this opportunity make sense for my business?”
If it does, you’ll want to begin the borrowing process. Here’s how:
How to Borrow Money for Your Business
By now, you’ve assessed your company’s need for funds or vetted a potential opportunity; and you’ve decided that borrowing money is in the best interest of your business. How should you go about the process?
There are a few different ways — two traditional routes and an alternative one. Each has their own advantages and drawbacks. We’ll discuss those now:
Pick A Lender
You can go straight to the source and simply pick a lender to borrow money from. This is the first of the traditional options. By choosing it, you won’t have to pay brokerage fees. But you’ll also be limited to just the specific programs your chosen lender can provide.
Also, a traditional lender’s money is private and heavily regulated. Some business owners may find this approach limiting.
Hire A Broker
The other traditional route is to find and hire a competent broker. His/her job is to find you the most agreeable loan terms for your specific situation. While you will have to pay them a small fee for their efforts, you’ll have access to exponentially more options.
Brokers are usually able to negotiate better terms on your behalf and expedite the approval process, as well. This is due to the industry relationships they’ve built and the fact that they know exactly how to package your file and where to send it.
An Alternative Route
Instead of hunting down the perfect lending or brokerage company, you can stay right where you are and work with an alternative lender like Cast Capital.
Depending on your need, we can either lend you our own money, or tap into our vast network of partners to get your business funded. This is a kind of hybrid approach and will give your company the most options.
Our loans can be custom-tailored to your exact situation, which has obvious benefits. But if you’d rather work with a traditional lender, we can facilitate the process so it’s much easier on you.
Even if you already have a particular lending company in mind, we recommend you give us a call. Our partnership network is vast and there’s a good chance we can get you better terms from the same lender. It sounds funny, but it’s true.
Should Your Business Borrow Money?
We can’t answer that question for you. But now you have the tools to answer it yourself.
Remember, you first need to assess your reasons for seeking capital. Do you have an actual need? Or have you identified a potential opportunity and need extra funds to take advantage of it? This is an important distinction to make!
After you’ve decided that a loan is, in fact, in the best interest of your company, it’s time to find a partner. You can go the traditional route and work directly with a lender or hire a well-established broker.
Or you can partner with an alternative lending company (like Cast Capital) and have the most possible options at your fingertips. This path also allows you to customize terms to your unique situation.
Work With Cast Capital
Use the information in this blog to make an educated decision on whether your company should apply for a business loan or not. If you decide that you’re ready to move forward with a funding partner, we’d love to aid you in the process!
Our staff is highly educated and ready to assist your business. Contact us for more details on how Cast Capital can help with a loan, credit line, or other forms of capital.