Have you considered the benefits of a business loan? You want to grow your business, but it seems risky to take out a loan. If you carefully choose your loan terms, a business loan is one of the best ways to grow a business.
Why do business loans make sense for growing your business? There’s more to it than having cash in hand. A business loan can help your business get noticed and prove you’re among the best. They also save you money over some of the other ways you may be thinking of paying your bills.
Interest Rates Are Favorable on Business Loans
Don’t make the mistake of using credit cards to grow your business. Credit cards get expensive.
A business credit card’s average interest rate is 17% to 18% (February 2022). Meanwhile, the average interest rate for an SBA business loan is much lower, at around 5.5% to 8%. Even an SBA microloan (loan value under $50,000) interest rate is 13% or lower, making it more advantageous to credit cards.
Suppose you borrow $50,000 and plan to pay it off over five years. With a 5% interest rate, the loan would cost you almost $57,000 in principal and interest. With a 17% interest rate for a business credit card, principal and interest costs increase to just over $74,500.
You save a lot of money taking out a loan vs. using credit cards. Credit cards may seem easier to apply for and use, but you’ll spend a lot more money on interest, which is wasting your money.
Small Business Loans Help Build or Improve Your Credit Rating
Use a business loan to grow your business, and it can help your credit rating. As long as you pay back each monthly payment on or before the due date, you prove you’re trustworthy. It helps give you the positive credit rating you want for your business.
There’s a Pad Available for the Slower Seasons
Depending on your trucking firm, you may experience slow seasons. If you typically haul loads for FEMA, you might not find a lot of work in the winter months. You tend to get more work in hurricane and tornado season, which means the winters can be slow.
You might do most of your hauls during the winter when you’re bringing sand and salt to cities in need of supplies for winter road treatments. Summer months won’t be as busy.
When you’ve sent aside money from a business loan, the funds can cover things until work picks up. You’re not stressed trying to figure out how you’ll pay your bills.
You Set Up Your Business For Success
The two leading reasons for business loans are purchasing inventory and purchasing equipment. You’re using money to invest in the equipment you need to expand. It may be purchasing new trucks, modern technology that makes finding and tracking loads easier, or upgrading your drivers with 5G phones.
With a business loan, you’re able to purchase an extra truck, which means you can double the number of loads you accept. The more you haul, the more retailers and manufacturers experience your reliability. They’ll tell their acquaintances, and that helps with word-of-mouth marketing.
You Have Extra Cash in Hand for the Unexpected
When you take out a business loan, you have cash in hand for unexpected expenses. You don’t have to use all of the money you’ve borrowed unless it’s needed. Put it into an interest-bearing savings account and let it build interest. If there’s an emergency, the money is already there.
Imagine having a full schedule, and one of your trucks breaks down. It would be best if you got the truck repaired ASAP, or you’ll lose business. If you don’t have enough in your savings, you’re in trouble. A small business loan saves the day in situations like these.
With the extra cash on hand, emergencies won’t send you into a panic. You know there’s a buffer for those surprise expenses. Plus, you’re paying your loan each month. If your loan is a business line of credit, you’re freeing up funds with each payment you make.
Marketing Your Business Takes Money
Marketing gets your business off the ground. Newspaper and radio ads may not fit your needs, but you still need to spread the word that you’re available to haul loads. This means getting your name out there.
At the bare minimum, you need a website, phone, and email for people to reach you. When you take the time to build a website and social media accounts, customers have an easier time reaching you with work opportunities. You don’t want to make something yourself if you lack the experience. A poorly designed website reflects on your business. It’s worth hiring an expert in marketing to build a site and set up social media for you.
Once the site and social media accounts launch, your staff can take over checking for messages and responding to clients. One thing to remember is that people have different preferences for contacting you. While some may be fine picking up the phone, others may prefer to use text messaging or emails where they can check for responses when it’s convenient for them. Spend the money to make sure your marketing plan works for everyone.
Clients Are Paying Attention to Your Space
Even a trucking firm needs parking spaces or garages for their trucks. They need to have office space, and that office space may have clients stopping by to pay bills, ask questions, sign contracts, or check in to say hi. You’ve rented or purchased a warehouse, but it’s a blank canvas. Would people wonder if you’re on the verge of shutting your doors, or would they know you’re running a thriving business? Décor in the offices, meeting rooms, and lobby help turn an empty warehouse into a workplace people feel welcome in.
Your office needs furniture for meetings. You need the office equipment necessary for printing contracts, taking calls, and hosting video chats as needed. Some greenery can make a huge difference. A business loan ensures you can make all of this happen, especially when you’re starting out.
Tips for Picking the Right Loan for Your Needs
What types of business loans are best for growing your business? You have options, but one to consider is a line of credit. You’re approved for a set amount, but you’re not obligated to spend it all. Suppose you get a $50,000 line of credit and only need to use $10,000 of it. That’s fine. It’s there to use when it’s needed.
Before you reach out, have a plan in place. Be prepared to discuss why you need the money, what your business projections are, and how you’ve grown your business so far. Talk about your business, how it formed, where it’s going, and what you’ve done to make it successful. If you’re ready to answer all questions and prove you’re a good risk, you’re more likely to get the loan you need.
Ask a business loan expert for advice. Saint John Capital offers business lines of credits that meet your needs. Use the money to cover payroll during work slowdowns or pay for unexpected repairs. The repayment terms work in your favor. Contact us to learn more about our line of credit business loans.