If you're looking to apply for a small business loan, you might think you're in luck! President Obama recently approved a bill increasing the small business lending limit to $23.5 billion after the Small Business Administration reached its annual limit of $18.75 billion and put all loan approvals on hold.
The increase reflects the growing confidence in small business as the U.S. economy strengthens. And record numbers of businesses are lining up for loans. But is it the right move for your small business? Let me offer a few points to consider before going after a loan:
- Don't borrow if you don't have to. The best way to avoid borrowing is to always keep a cash cushion. Make sure your cash flow is sufficient to service the debt before you take it on.
- It's always good to have access to credit. The time to get that credit is when your business is doing well, before you really need it.
- If you do borrow, limit your liability and keep business and personal finances separate. Avoid making personal guarantees.
- Acquiring big ticket items is usually the best reason to get financing. These should be productive assets that will increase your output or reduce other production costs.
- Most importantly, always have a plan. What are you trying to do? How will you accomplish it? Be able to describe how financing fits into the plan and how you will be able to repay the loan.
Do you have a plan to achieve profitability and growth for your business? Bookkeepers Plus provides financial management services to help small businesses succeed. Contact us today for a free 30 minute consultation.
Tony Solgard, a QuickBooks Certified ProAdvisor, is president of Bookkeepers Plus, located in Cape Coral and Bonita Springs, Florida, and providing bookkeeping services to businesses nationwide. His blog helps business owners understand why accounting details are important and to educate them (or whoever they assign to the bookkeeping function) on how to do it right. The blog offers accounting, bookkeeping and financial management tips, points you toward small business financial resources, and gives a shout out to small businesses with financial success stories. It discusses the pros and cons of using QuickBooks as well as provides tips to maximize your use of QuickBooks.