Grab this opportunity to finance business growth
Thursday, October 22, 2020
You may have seen mentions in the business news of late to “free money.” Perhaps you thought to yourself, “how do I get some of that?” In reality, of course, the money isn’t free. But interest rates are so low right now that, relatively speaking, by traditional lending standards it is practically “free,” which is to say that the cost of borrowing is not much more than the cost of the principal. That makes this a great time to raise money to fund business expansion and new ventures.
Many commercial real estate and retail properties have declined in value due to the efforts to contain the spread of the coronavirus. This could be a good time to purchase an office space or storefront property that may have additional rental income potential in the future. Consider, though, how working from home, online shopping and relocations have and may continue to have an impact on where people will want to work and shop.
Speaking of online shopping, it has skyrocketed in recent months, and that trend is only going to keep growing. With more and more clients preferring to do their own purchasing, consider engaging some tech expertise to build out an online store and/or a smart device application. An app could serve both to market your interior design services and to facilitate purchases of a collection of items that you have personally curated.
Any financial planner will tell you that having a diversified portfolio is your best hedge against any sudden downturn in the economy or a particular business sector. If all your assets are invested in your design business, a low-interest loan can be a less risky means to help you branch out into other ventures. You may know a local supplier or service provider who’s wanting to expand their business or a promising startup looking for investors to help them grow.
Given the current uncertainty about the economy and the COVID-19 health crisis, many major and local commercial banks have tightened their criteria for qualifying small business loans. If you have a line of credit or have had a previous loan with them and a good credit history, and your business is on a sound footing, you have a better chance of being approved. Talk with the loan officer at your bank about what types of loans are currently available and at what terms.
The U.S. Small Business Administration provides low-interest loans for improvements and real estate purchases under certain conditions. These and other types of credit, including startup loans, are available through many credit unions. Another option are online lenders who cater to small businesses, many of whom offer rates lower than traditional banks, and, in some cases, require no application fees. If you have a PayPal or Square business account and meet their criteria, you can apply through them for a capital loan or line of credit. Online applications processes and approval decisions often are much quicker than through a bank.
You can increase your chances of obtaining credit by first making sure all your business banking and accounting documents are up-to-date and in good order, with no blights on your credit history. It’s easier to borrow against an existing entity rather than a new one, unless you are specifically applying for startup funds, so begin there. With mortgage rates so low at the moment, in a pinch you could take out a home equity loan or personal line of credit secured by your home equity to fund your expansion or venture.
Finally, consider partnering with someone who can bring both financing and applicable knowledge and skills to make your new venture a success. Having a business partner one trusts can make launching a new venture more fun as well spread the risk and the work.
Take some time to research your options before you apply for credit. Search “small business loan” and you’ll find lots of good information online about qualifications, lenders and offerings. Be prepared for some paperwork and, depending on the lender, to wait a bit for approval. If you get turned down, try another source. Lending is tight in some quarters, but money is available for proven businesses and at rates that make borrowing now a good business decision.
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