3 Reasons Why You Should Get a Small Business Loan
Updated: Jan 10
Looking for more information on small business loans? Check out Honeycomb's Ultimate Guide to Getting a Small Business Loan
Are you on the fence about seeking out a small business loan? Well, there are many reasons to consider a small business loan, beyond just the fact that you can get some much-needed capital for your business.
Getting a small business loan can allow you to make improvements while keeping your cash flow steady, can help strengthen your relationships with the community, and can help you build credit on your business for future lending.
Here are the three biggest reasons you should consider getting a small business loan:
Read on to find out more about the reasons why you should get a loan for your business, and check out Honeycomb Credit’s options for crowdfunding a small business loan.
1. Get an influx of capital for your small business while keeping a steady cash flow
As a small business owner, you might feel safer using some of your own savings to finance a growth project you need for your business than you would taking out a loan. However, once that money is tied up in the project, you won’t have it available for any other needs you might have that come up!
Capital needs for major projects, like building out, renovating, or expanding your business, get pretty costly, and even the most fiscally responsible businesses probably don’t have enough cash on hand for them. This is a great opportunity to get a loan for your small business.
Getting a small business loan will allow you to basically continue business as normal with your normal cash flow — meaning you can pay your employees, purchase inventory, pay for other expenses — while also building upon something that will allow you to make more money in the future.
2. Build stronger relationships with your community
You don’t often think small business financing is about relationship-building, but it very much is. By taking out a small business loan, either from a traditional financial institution, an investor, or a crowdfunding campaign, you’re reaching out to others and forming relationships in the process.
If you go the bank route of getting a loan, you’ll be meeting and working with their loan officers, and building up a rapport with them. As we’ll discuss in more detail later, this can open up opportunities for more and bigger loans in the future.
Investors are also another route that you can take when looking to take on debt for your small business, and it’s as much a business relationship as any! Even if you’re taking on a loan from the investor, and not giving up equity, you’re still in some form of a partnership with them, and as a result can be part of their network.
With all this in mind, one of the best ways that you can leverage a small business loan to strengthen your relationship with your community is by running a debt crowdfunding campaign. In this kind of crowdfunding, your customers are the ones lending to you, investing in your business.
In this way, your customers are not only tangibly investing money in your business, but they’re also becoming more closely involved in your business as well in a more intangible sense.
We call this the transformation of customers into brand advocates. If your customers are investing in you, they’ll want to see you succeed and will do what they can to make that happen. They’ll shout your business’s name from the rooftops, invite their friends to check you out, and of course, come spend money at your business.
3. Improve your business’s credit, and open up doors for the future
One of the reasons you should consider taking out a small business loan, even if you’re just a start-up business, is that a loan can help you build up credit for your business.
Often, lenders won’t give small businesses a second look if they’re trying to get a large loan with no real financial history to back them up. So, why not start small? Getting a small business loan, even one of a small amount, and paying it off in a timely manner can open the doors to larger loans in the future.
This can also help you if you want to start building a relationship with a lender like a bank. Starting with a small loan, paying it off, then returning for a larger one is a lot easier if you return to the same lender.
That being said, the same applies to crowdfunding! We often find that small businesses that have crowdfunded before in the past, either debt-based or reward-based crowdfunding, often have greater success after a second campaign!
Square Cafe in Pittsburgh is a great example of this: owner Sherree Goldstein ran a crowdfunding campaign with Honeycomb for another one of her businesses, My Goodness, and raised $35,000. After that, she ran a campaign to finance Square Cafe’s move to a new location and raised $250,000 in record time!
Considering a loan from Wall Street? Have you tried Your Street?
Crowdfunding a small business loan can help lift up your business for the reasons above and more. Learn more about running a Honeycomb Credit crowdfunding campaign at www.honeycombcredit.com/grow, and fill out the form below for more information.