Just about any small business can use a loan, no matter what stage they're in or how well they're doing. There will always be financial needs or areas where some extra cash can make a positive difference. Here, we'll look at some of the best uses for a small business loan.

1. Startup Costs

One of the most common reasons people apply for a business loan is the aid that one can provide with startup costs. It takes money to make money, and starting a business may require you to expend a lot of money before you start generating revenue and profits. Common expenses include office space, equipment, insurance and fees, software, marketing, etc. If you need financial help to get your business off the ground, a small business loan is an option.

2. Working Capital and Inventory

You may simply need more working capital, and this is certainly a common use for a small business loan.

"Small businesses may take out a loan to satisfy operational costs until their earnings reach a certain volume," says Rosemary Carlson at The Balance Small Business.1 "If the debtor has good credit and a solid business plan, a bank loan can offer short-term money for a business to get off the ground and grow."

Businesses may need a loan to grow their inventory, so they are better able to meet the needs of their customers.

3. Administrative Expenses

Administrative expenses include things like rent and utilities, as well as payroll, equipment and office supplies, legal counsel, etc. Depending on how much of a financial burden all of this is on your business, a loan can help you deal with it without putting too much of a strain on your bank account.

4. Real estate and renovations

If you need to expand your operations or simply relocate, a small business loan can help you pay for the real estate expenses that come with your needs, Likewise, if you need to make renovations or repairs to your existing space, a loan can provide you with the cash you need without your cash flow having to take a hit.

5. Expansion

Expanding your business can be costly, even beyond the physical real estate costs involved. As you grow, you'll have to increase equipment and supplies, and you'll have more payroll expenses to account for, not to mention additional insurance, licenses, fees, etc. A loan can help you achieve the growth your business needs to move into a new market.

6. Debt Relief and Refinancing

A small business loan can be used to refinance your current debt or help you consolidate higher-interest debt into a new loan with a better rate and/or monthly payment. There is a difference between consolidating and refinancing, but either can be extremely helpful.

As Nicholas Pell at The Simple Dollar explains, "Consolidation is when you bundle all of your existing strands of debt into one single loan. That might or might not involve a lower interest rate, but it is not, strictly speaking, refinancing. On the other hand, refinancing will leave your existing lines of credit, loans, and whatnot in place as they are, just at lower interest rates than you’re currently paying."2

7. Marketing

You may want to consider a loan if you don't have the marketing budget you need to attract the number of customers required for your business to excel. Marketing costs can get expensive, especially in competitive industries.

8. Seasonality

If there is a seasonal component to your business, and there are regular periods of time when business is particularly slow, you might be able to get a loan to help your cash flow stay positive during these more difficult times.

There are many possible reasons why a small business loan can prove beneficial to your business. And there many different types of financing, from conventional loans, to SBA-backed loans, business lines of credit and equipment financing. Explore Nevada State Bank's business loan options3 to see which one is right for you.

 

1. https://www.thebalancesmb.com/four-reasons-to-take-out-a-business-loan-393255

2. https://www.thesimpledollar.com/loans/blog/business-debt-consolidation-and-refinancing/

3. Subject to credit approval. Terms and conditions apply. See a banker for details.

 

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank. Nevada State Bank is a division of Zions Bancorporation, N.A. Member FDIC