According to the Biz2Credit Small Business Lending Index, small business loans are up 20 percent over this time last year. The trend is toward using larger banks which offer lower interest rates than the smaller and non-traditional lenders. Though the rate of loans is up, the reasons small businesses obtain loans is about the same. Here are worthy investments to put small business loans to good use.
Loans to Expand Operations
A growing business is a good thing, and the largest number of small business loans goes toward expanding operations. This includes boosting production and buying larger facilities, but it also means expanding the call center operations in order to handle the larger work loads.
Loans to Invest in Equipment
Equipment is the next biggest reason small businesses take out loans. Most of this is production equipment, such as machines for manufacturing or computers for software development. But this can also include infrastructure, such as servers to boost operations in the IT department, a better computer network, and advanced phone systems.
Loans to Invest in Inventory
Inventory is tricky. If companies invest too much in inventory, it takes away cash necessary to do day to day business. But if companies don’t invest enough in inventory, it hurts their ability to meet the needs of their customers, potentially costing them sales and clients. It pays to do diligent research before taking out a loan or ordering inventory.
Loans for More Working Capital
Another reason small businesses take out loans is for working capital, which is the money it takes to run the business day to day. However, if a business has to take out a working capital loan more than once, there’s a problem. With the right amount of inventory, the proper working equipment, and affordable call center operations, the business should bring in enough to float the business within a short while.
Small business loans, when used properly, are a viable tool for expanding any business