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Is It Time to Seek Business Financing?

Key Takeaways

  • Identifying a need for financing well in advance gives you time to explore funding sources and ensure you make the best choice.
  • Outside funding can allow your business to enhance its offerings, expand geographically, and purchase tools that improve efficiency, all while protecting cash flow.
  • Financing can also be a strategic move for less-established companies to build their credit rating.

A loan or line of credit can help your business manage dips in cash flow. Having financing in place is also a strategic move, since it positions your company to grow as well as capture opportunities.

Many businesses wait too long to look for financing because they miss the signs that they’ll soon need it. Watch for these signals that a need may be approaching:

You’re turning away business

Perhaps your customers or prospects have asked about products or services that you don’t have the resources or funds to support. Or, perhaps you’ve had to turn down large projects or orders because you’re not adequately staffed. A loan or line of credit could provide funds for these purposes. Weigh the cost of the investment against the potential revenue and profit it could allow you to capture.

You’ve outgrown your location

If your business is often fully booked, or you know that there’s demand for your product or service in a location you don’t currently serve, financing could allow you to expand. The potential upsides of expansion — greater revenue, higher profits, better name recognition — are significant, but making the move requires careful research. Along with understanding the market potential in the new location, determine as best you can how the additional costs will compare to the gains.

Operational updates could spur success

If your current equipment or technology is limiting your output or efficiency, financing can pay for upgrades that make you more competitive. Though these tools may entail significant upfront expense, the productivity gains they make possible could make you more profitable long-term, and even yield benefits that you can’t foresee.

Your cost of debt can be reduced

Perhaps you took out a loan when interest rates were higher than they currently are or when your credit profile wasn’t as strong. Refinancing at a lower rate or even consolidating multiple sources of higher-interest debt could lower your monthly costs and boost your cash flow. Loans from the Small Business Association (SBA) are often good refinancing vehicles because they can offer long terms at low rates. Be sure to carefully review the fees associated with any new form of financing.

Your credit history could use strengthening

Making consistent, on-time payments on a loan or line of credit shows that you’re a good debt manager. This positive profile can position you to obtain larger financing amounts in the future. Taking a small loan or line of credit and paying it off promptly can be a smart strategy for young businesses that have not yet built a credit history, or for those whose credit rating could use a lift. Before you apply for financing, carefully analyze your cash flow to be sure you can manage the regular payments.

More information

When you identify a need for financing in your business, Citizens Bank can help you take the next step. Our business bankers will work with you to find the financing option that best supports your needs and goals.

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