Why and When to Consider a Business Loan.

There is a certain value in knowing what your competition is up to. In some cases, this knowledge about your competitor can be the make or break for your business, e.g. in the property sector where knowing the operations of your local competitor is the single most critical point in acquiring new business. In other cases, understanding the competitiveness of the market has led to new opportunities.

For instance, the whole idea of Zoopla and Rightmove is based on taking advantage of this competitiveness in the student accommodation property letting sector and scale as platforms that enable, or even intensify this competition. Specifically, such platforms allow property businesses to cross compete for a market share in a fairly open manner. However, such platforms did not come to life out of thin air. These ideas needed the right financing.

The Importance of Business Loans

The idea behind Zoopla and Rightmove had the legs to go far.

However, in both these cases, the said idea needed the right support, primarily in the form of business loans and other forms of funding, to first execute the idea and then place it in the right market setting through technical development and hiring the right team members. Each of these steps were taken in a calculated manner with the right technical and strategic support.

But, this does not mean that every business idea should be driven towards a loan.

When to Take a Business Loan

It goes without saying that a business loan isn’t suitable for every business.

In particular, you must test out your business idea and gauge your market response, at least in a limited sense, before going all in.

For instance, one of our close connections, at Sorev, is building a platform for serviced offices. However, before looking into any form of financing, including loans, Sorev is testing the market in the Leicester scene for serviced offices. Once the management at Sorev tests the said idea, they will be able to break into bigger cities with confidence, financing the needed hiring of technical developers as well as developing an outreach, sales team with a loan.

When a Loan Works

The simple fact is: business loans should be used to scale businesses, ensuring that you are able to take the market share and reach a sustainable financial state. This is because most businesses have got a successful working model, but managing cash flow is a different level of business challenge. And this is when business loans become pivotal to fulfil short term needs that can be sustained back in the long term.

We will go a step forward and state that if you have done your tests and can back the data with numbers, loans must be your preferred option. Of course, there are alternatives to business loans in order to access finance, such as securing cash from investors, however you’ll have to be prepared to give away equity. 

Case Study

OMC Global has been operating for 14 years in Oxford and recently turned down a £2 million takeover in favour of a loan.

The business provides luxury and corporate vehicles to businesses and minibus hires to schools.

As you can imagine, it took hard work to get there, however at one point, a large loan was required as business picked up but did not have enough vehicles to cover the workload. The said large loan financed the business scaling, in terms of buying the needed vehicles, while also solved the cash flow issues to grow the team.

Now, the loan has been paid back and the business is still booming, with a current extension to Milton Keynes recently.

Seeing a Loan the Right Way

We come back to the same principle: a business loan can do wonders for your business if utilised well.

In fact, you should look at loans as an investment rather than a cost. It’s the same principle that a growing number of parents are using, sending kids to after school tuition, to prepare them for university through academic and personal growth that comes through the said extra help. The university in itself then is an investment for the future of the child, continuing the improvement of tomorrow with an action today. The dots just connect at the right wavelength when actions are drawn from sensibility.

To learn more, or to discuss your options for business loans, get in touch with us today.

This article has been sponsored by Birmingham Accountants