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Does Your Small Business Need a Loan?

Guest blog by Samantha Novick of Bond Street 

There are certain elements that you need to run a successful small business. A solid business plan and determination can take you far, but if you really want to grow, you'll need capital to fund your expansion plans.

If you don't want to drain your cash reserves, a loan may be just what you need to pursue your next phase of growth. Before you can advance your business using a loan, however, you have to be sure that it's the right move.

What can a small business use a loan for?

One of the best things about financing your business with a loan is the flexibility. Loans can be tailored to fit the individual needs of your business.

If growth is the goal, for instance, you could use a small business loan to:

  • Hire new employees
  • Open a new location
  • Renovate your current location
  • Update your website
  • Launch a new marketing campaign
  • Replace or upgrade your business equipment
  • Stock up on inventory
  • Refinancing existing debt

Loans can also be helpful for covering short-term or day to day expenses, and dealing with cash flow finance needs such as:

  • Monthly lease or mortgage payments
  • Utilities
  • Employee payroll
  • Taxes
  • Insurance premiums
  • Supplies
  • Building or equipment maintenance and repairs 

A loan may offer a shorter repayment term of just a few months, or allow you to spread the payments out over a period of years. You may be able to borrow a few thousand dollars or up to $500,000, depending on the lender.

There's another reason why you might choose a loan to finance your business. While you could get funding from angel investors or venture capital, it means handing over some of your equity. With a loan, you have to repay what you borrow but you're not sacrificing any of your ownership in the business.

Does a loan make sense for your business?

Now that you know some of the ways you can use a loan, it's time to answer the real question: should you get one?

The easiest way to answer this may be to think about what kind of return on investment the initial cost of capital could generate for your business. For instance, if you're thinking of using a loan to expand your staff or open a second location, what would that do for your business? If it would help to drive up sales, would the boost be enough to justify the cost of borrowing?

When debating whether a loan makes sense, you always have to consider how it could affect your business over the long-term.

If you have a specific purpose in mind that you think a loan could be useful for, it's important to be clear about how the cost balances out against any benefits you stand to gain. Also, think about how borrowing could affect your future cash flow if you're looking at a longer repayment term. Taking on a loan to grow your business could backfire if you find yourself unable to keep up with the payments down the line.

Do your research and know your loan options

If you think a loan could be a good fit for your business, there's one last thing you need to know: they're not all alike. Between term loans, merchant cash advances, SBA loans, and a bevy of other options, you’ll need to determine which type of financing is the most appropriate for your business’s needs.

Loans can come from a variety of sources, including banks, credit unions and online lenders and a variety of forms: Each lender has its own guidelines for how much you can borrow, how long you'll have to repay a loan, the interest rates you'll pay and the minimum requirements you'll need to meet for approval.

Before you commit to a loan, take time to compare the terms being offered by different lenders. Then consider how those terms mesh with your budget. Finally, calculate your anticipated return on investment, based on the loan costs. When using a loan to grow your business, or to simply cover your everyday needs, it pays to be as knowledgeable as possible about what you're signing up for.


Bond Street is a company transforming small business lending through technology, data and design. Bond Street offers term loans of up to $1,000,000 with interest rates starting at 6%.