Earlier this week, Libby discussed small businesses and what exactly their main goal is, in most cases. While some small business owners may tell you something different, small business or rather, most businesses of any size are trying to do one thing: make a profit. No matter how you spin what a company does, they are in business to make a profit even if it is done by providing something people need, solving a problem that certainly needed solving or helping others in some way. Unless your business is a non or not-for-profit, you are trying to make a buck.
In this economy I’m sure you’ve all seen businesses suffering, turning to ways we don’t agree with, like raising prices, to increase their profits in one area while another shrinks. Many simply close up shop as a result of things.
But what if you had a product you know will take off, something that is catching on but not quickly enough? Or something you are unable to supply what is demanded because you don’t have the resources on hand. Well, in such a case, it may be in your best interest to take a gamble and by that I mean, take out a short term loan to fill in the gaps temporarily.
By taking on a short term loan, you would have the resources to do what you needed to help your small business grow right away. You wouldn’t miss your opportunity to provide what customers demanded and best case scenario, nothing stands in the widespread use of your product and your business has a long healthy life.
Short term loans may have taken on a negative connotation in recent years but there are situations where they have their place, just like any type of financing. For example, take the situation described above. Say you approach a bank for a business loan to get the funds to produce what you anticipate of demand. That process, should it even have positive results, can take a great deal of time.
For a small business trying to take hold of a market share, time is not something you have in abundance. You may get the loan at a decent rate in a few months, and by that time, your customers moved to a company with better financial backing that could produce the product in the time frame they wanted. I’ve seen this happen myself and it is not fun to watch a company suffer and die simply because they launched a month after the competition or weren’t prepared for the kind of demand they’d have on their product.
Short term loans can fill in where needed and when taken with caution, can be a viable source of financing for a small business or individual.