5 unexpected times to get a business loan

5 unexpected times to get a business loan

September 1, 2023
5 minutes read

Business financing isn’t just helpful—it’s essential to most businesses' survival. Most business owners will need capital at some point to either get operations off the ground, grow, or weather a tough time. Here are some of the most common reasons businesses use financing: 

  • To cover startup expenses
  • To purchase real estate, land, or equipment
  • To recover from an emergency
  • To increase working capital
  • To take advantage of a growth opportunity
  • To restructure debt

But what about all the situations in between? The right type of business financing can be beneficial in a variety of instances. Read on for five unexpected times to consider getting a business loan!

1. When revenue is steady or growing

Getting business financing when your revenue is consistent or growing can position you for greater success long-term. At first, it might seem counterintuitive to take on debt when your business’s financial health is strong, but it’s actually one of the best times to get a loan. Here are a few reasons why:

  1. A stable revenue history can help you qualify for better loan terms, like a higher borrowing amount, lower interest rate, or longer repayment period. 
  2. You have enough revenue coming in to make repayments on time. 
  3. You can use the funds to expand your customer base, improve your products and services, or enhance your customer experience.

Depending on your business goals, you might want to hire additional salespeople, upgrade your marketing analytics software, relocate your brick-and-mortar establishment, or strengthen your supply chain. 

Just make sure you review your financial documents in detail before applying for a loan. That includes your profit and loss numbers and cash flow statements from the past 12 months, as well as your revenue and cash flow forecasts for the next 12 months. 

Financing to consider: Small Business Administration (SBA) loan or online term loan.

TLDR: Take advantage of your financial stability to invest in your operation’s long-term growth.  

2. When you want to improve your business credit score

One of the most effective ways to increase your business credit score is to manage new debt responsibly. Of course, it’s helpful to update your business profiles with the three main credit bureaus and work to lower your credit utilization ratio, but if you’ve already tried those tactics, it might be time to consider financing. 

It’s important to remember that getting a loan to improve your business credit isn’t a quick fix—it’s a long game. It takes time to change your number, but a higher business credit score opens you up to more financing opportunities in the future. 

Not only are you more likely to get approved for bank loans and SBA loans with high credit standards, you’re also more likely to qualify for lower interest rates and longer repayment periods. Plus, a higher credit score makes it easier to negotiate payment timelines and rates with vendors.  

There’s a catch, though. You need to have decent enough credit to qualify for financing you can actually pay off. If you get approved for a loan or line of credit with a low credit score, you could end up with sky-high interest rates you can’t afford. If you start missing payments, you might end up locked in a debt spiral—and your credit will drop significantly as a result.

That’s why it’s smart to follow these rules of thumb when using financing to improve your credit:

  • Work to raise your score to 600 first. 
  • Calculate your debt service coverage ratio to make sure you can handle new debt. 
  • Research the lender’s terms, APR, and fees ahead of time. 
  • Schedule payments in advance so you never miss one. 
  • If you’re taking out credit, keep your credit utilization ratio at 30% or below.

Financing to consider: Business line of credit, business credit card

TLDR: Get a form of financing you’re confident you can manage and pay off on time. 

3. When you need to cover employee-related expenses

Your employees keep your business operational, so it’s crucial to invest in their success inside and outside the workplace. Getting financing is a great way to cover key employee expenses if you have a temporary gap in cash flow. 

For example, maybe you need a business line of credit to make payroll while you wait for client payments to come in. Or maybe you want to use a term loan to upgrade your employees’ equipment, hire a recruiter who can help you find great talent, or revamp your employee benefits package

Just make sure you have a plan to bolster your cash flow and maintain any changes you implement, so you’re not relying solely on long-term financing to support and retain your employees. 

Financing to consider: Term loan, business line of credit

TLDR: Use business financing to support and safeguard your workforce when you’re in a cash crunch. 

4. When you’re in the middle of a slow season

Extra cash flow can help you survive slow seasons and unexpected lulls without draining all your business resources. What’s more, you can make strategic choices with your funding to help increase your revenue over the next quarter or maximize sales during your upcoming busy season. 

Depending on your business model and current financial situation, you could get a business line of credit to cover regular operating expenses like rent and utilities or apply for a term loan to invest in bigger initiatives. Think: rolling out a major marketing campaign in preparation of a busy season or buying new equipment to streamline day-to-day operations. 

Financing to consider: Term loan, business line of credit

TLDR: Use business financing to either stabilize operations during a slow period or prepare for your busy season. 

5. When you want to hop on a consumer trend

Economic conditions, political happenings, social media movements, and cultural events all influence consumers’ priorities—and alter the business landscape as a result. If you want to respond to cultural shifts and capitalize on consumer trends, business financing can help. 

You might want to stock up on extra inventory to meet a spike in customer demand, for example. Or maybe you want to open a second business location or launch a new product that caters to customers’ current interests. On the other hand, you could build an app that complements your business or renovate your storefront. 

Whether your goal is to foster loyalty with current customers, attract new ones, or embrace a different niche, a thoughtful plan—combined with the right amount of funding—can help you get there. 

Financing to consider: Term loan, business line of credit

TLDR: The right business loan can help you seize on a consumer trend and garner favor with your customers. 

Get ahead with better business financing

If you need financing for an unexpected (or commonplace) reason, consider Funding Circle’s business-forward solutions. Funding Circle offers business term loans, business lines of credit, and SBA loans with flexible terms and fast turnaround times. 

Applying takes just five minutes. All you have to do is submit a handful of documents and you’ll hear back from one of our Loan Specialists in as little as 24 hours. Learn more about what it takes to qualify or apply now.

By Paige Smith

The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

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