High interest rates put a damper on getting a loan. People in the homebuying market have been waiting for lower rates to make an offer. Those who want a new car have been waiting for lower rates before taking out a new car loan. Small business owners have been holding off on getting growth-enabling loans because they’re not willing to spend so much on interest.
So, small business owners are asking themselves now, “Is this the right time to focus on growth and take out a loan?”
The answer depends on how ready you are for a loan. You’ll need to assess your risk and risk reduction through commercial insurance policies. You’ll also need to evaluate your growth plan. Getting money for the sake of getting money will be unlikely to lead to good results. And you’ll need to consider if the money you pay back on a loan could be used in a better way.
Risk and Risk Reduction
Businesses face risks from several sources. There’s the risk that their products and services could become irrelevant. Businesses could face competition that could undercut them and take their business.
There are ways to prepare for those types of risks:
- Know your niche audience
- Think outside the box
- Look for ways to cut costs without cutting quality
- Stay one step ahead of the competition
There are also risks that insurance products can mitigate. Those risks include:
- Liability lawsuits
- Property damage
- Cyber attacks
There are insurance products for each of these risks. General liability insurance is appropraite to protect your business from lawsuits.
Property damage liability is a wise policy to purchase because it can help you rebuild after a weather incident shuts your business down with damage or someone breaks in and steals your equipment.
Cyber insurance is necessary to help you recover from a variety of cyber attacks. This type of insurance wasn’t even available a few decades ago and now it’s very important.
If you haven’t put assets toward protecting your company from risks, you’re not ready to take out a loan for growth. Get the insurance you need first, and then focus on growth.
Plan for Increased Sales and Growth
If you want to take out a loan, you need to make sure the money you borrow will enable you to earn enough income to pay back the loan and earn higher profits. So, you need an effective sales strategy.
Your plan should be detailed and actionable. You’ll need to break down the cost of your loan, how you will use your borrowed money, and how that will affect your profits.
Talking to other businesses in similar positions can help you realize costs or issues you may face that you hadn’t thought about.
With interest rates lower, your money will go further when you take out a loan. But it’s also possible that if you wait longer, interest rates will go down even more, so there may be a benefit to waiting a bit longer before borrowing money.
The Best Way to Spend Money
Taking out a small business loan will give you money to do something with, and the goal is to end up with more revenue and a stronger company.
But your loan comes at a cost. You’ll have to pay back the loan, and even though the interest rates aren’t as high as they were before, you’ll spend a lot of money on interest. So, you’ll have to consider the possibility of using the money you would spend repaying the loan and putting it towards another avenue to grow your business.
If you want to give your company the best foundation, you need to make sure you have protective insurance policies in place, develop a plan for growth, and evaluate the best ways to spend money.
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