Some Key Questions Before You Borrow

Before approaching your financial institution, you should identify your actual loan requirements by answering some key questions.

Does Your Business Really Need to Borrow Money?

Some small businesses, particularly small service businesses with low start-up and operating costs, do not need to borrow money because of the following reasons:

• a monthly basis, they take in enough money to cover expenses, or
• money they (and others) have invested in the business provides the necessary financing

However, most small businesses, at some point in time, need to borrow money to do the following:

• Finance start-up costs and negative cash flows until the business is well established
• Finance business growth and expansion until customer demand for the business' product or service increases
• Fill a need for working capital to cover operating expenses, such as rent, wages, and inventory purchases
• Finance major capital expenditures, such as buildings, land, and equipment.