Wait for it! 5 reasons to delay applying for startup business loans
Congratulations! You’ve successfully opened a small business, and you’re ready to take-on the exciting venture of being an entrepreneur. During the first few months, you may feel overwhelmed by the investments you need to make in order to guarantee that your business is effective. It is important to start off strong, so that you can begin to form lasting relationships with your customers, and ensure that your business will be profitable.
If finances are already a concern, you may have contemplated applying for startup business loans. While working capital can be a constructive way to grow your small business, it is essential that you apply when the time is right. In this post, we’ll explain why your small business should wait until it is open for a few months before submitting an application.
1. You’ll have a better idea of your business’s needs – After a few months in business, you’ll understand where working capital could come in handy. Maybe you want to hire additional employees, purchase extra inventory or pay for technological features. By postponing your application, you’ll be able to properly assess what your business’s demands are, and how much money these projects will entail.
2. You’ll be more likely to meet business loan requirements – Many lenders won’t provide a loan for a new business until it has been up and running for a certain length of time. This means you won’t be able to receive startup business loans. By waiting until your business has been operation for a few months, you’ll likely meet the time in business loan requirements.
3. You’ll receive an amount that you can handle – If you apply for a loan after your business has been functional for a few months, you’ll be able to show a lender multiple bank statements. They’ll be able to determine the flow of your business’s finances, and will be able to offer you an amount that your business can manage.
4. You won’t regret it later – If you apply for financing too soon, you may realize later that you didn’t need the full amount that you borrowed, or that you could’ve gone without it until a later date. It may become a burden to pay back the full amount, which could put financial strain on your business. Waiting until you are sure that you need financing, and that your business has been up-and-running for a longer period of time will be a more responsible way to go about it.
5. Your business may go through changes – The first year or so after opening a business can be a very hectic time. You may decide to scale down your business, or you could have so much demand that an expansion is required. There are many variables that you won’t be able to predict. Give your business time to develop before you fill out that working capital application. You never know how your business is going to be doing in a few months after opening.
If you’re looking for a loan for a new business, it might be wise to wait until you’ve been in business for a few months. While startup business loans can help you advance your new business, it is crucial that you wait until the time is right! Did you take out a startup business loan? If so, let us know in the comment section below how it benefited your business.