At some point in our lives, financing will be required to help achieve our goals. This goes for our personal lives as well as our business objectives. If you are an entrepreneur, the right business loan can make a huge difference in whether your start-up gets off the ground and succeeds in its first year. In terms of personal finance, it will directly impact where we live, what we drive and what we choose to buy. But how much finance do you need?
Enough to Consolidate Debts
Over time, you may accumulate debt relating to your business that could become unmanageable. Whilst pursuing your objectives, you may have lost sight of the number of different creditors you have. Consolidating these debts through a business loan can help make it much more manageable, so borrowing enough to cover this is required. In our personal lives, we may have times where bad credit loans can help when our credit rating is low and essential expenses need to be covered. Any type of loan that helps with our business and personal finances needs to be enough to cover the issue so that you can then focus on repaying becoming debt-free.
Enough to Expand
If you are borrowing to help your business expand, you will want to calculate how much you will need to cover your plans. Rather than applying for the maximum loan amount you can find, it’s best to be more accurate and only borrow what you need in this situation. If you want to be able to afford bigger and better premises, for example, you’ll need to see how much of a deposit and the monthly instalments will be for this. You’ll also want to consider furniture, storage, and equipment to go in these premises, all coming with their own costs. If you have specific items in mind, you may want to lease or use hire purchase methods instead to help keep costs exact. That way, you won’t be borrowing more than you need to.
Enough to Avoid Over Reliance on Credit
Being over-reliant on credit can come with its own issues, especially if you’ve borrowed too much and sales revenue has not gone as forecasted. This can lead you to borrow more money just to make ends meet. This can be an issue in both our business and personal lives. However, with the right planning and forecasting, you can work out how much money you may need for the next year or two at least, helping you borrow a larger sum rather than many smaller loans. Ideally, if you can secure other forms of financing that does not require repayments, such as an investment or crowdfunding, you can reduce the amount you need to borrow from banks and finance companies.
However much you decide to borrow with a business loan, remember they are not guaranteed to be approved. Your credit rating will need to be in a good place for many business loans as well as providing a valid business plan for much larger values above £25,000. There are specialist start-up loans, for example, that can help those with a less than perfect credit history, so research your options and choose wisely before proceeding.