When you’re looking to expand your business, for example by launching a new product, moving to larger premises or growing your team, a business loan could help to fund your ambitions.
Before making any decisions about borrowing to expand, you’ll have to consider some key questions, for example:
- How much money do you need to borrow, and what are the expected costs of implementing your expansion plan?
- Does your business generate enough income to cover the loan repayments and interest?
- Is there strong demand for your new product or service?
- Does your management team have the expertise to handle the challenges of expansion?
- Are there any potential risks, such as changes to your market or supply chain?
Developing a detailed business plan, including financial projections and market analysis, will help with your decision. An accountant or financial adviser could help you to analyse your plans.
Before taking out a business loan, always consider the following points:
- Repayment terms: The length of time to repay a business loan can range from a few months to several years, so you’ll need to be mindful of the need to make ongoing monthly repayments during the term of the loan.
- Personal guarantees: If you provide a personal guarantee for a business loan, you’re personally liable to repay the debt if the business cannot do so. It’s important that you consider getting independent legal advice to ensure you understand the terms of any personal guarantee.
- Terms and conditions: If you breach any of the terms and conditions of a business loan, this could affect your business’s ability to borrow money again. For example, lenders will generally inform credit reference agencies when repayments are missed, so it’s important to understand the terms and conditions before you take out a loan and make sure you keep up with repayments.
A business loan can be a valuable tool to help expand your business. However, it’s important to make sure this is the right decision for you. If you ever find that you are in financial difficulty, you should let your lender know as soon as possible so they can work with you to find the best solution.
Find out more about business loans at LendingCrowd.