To Finance or Not to Finance? That is the Question

When you own a business, there are an overwhelming number of decisions that must be made daily, if not hourly. One of those is whether or not to utilize small business financing products. If you do use them, which ones should choose? What do you have available to you?

These questions are not as hard as they seem, if you have a logical process for arriving at the answer.

What Do You Need?
The first step in the process is to consider exactly what you need. This question must really be asked twice. First, you must ask yourself what you need financing to accomplish. Are you just starting up? Are you expanding or buying equipment? Are you just strapped for cash and needing to cover expenses?

The other way to consider this question is in relation to what type of financing you need. The answer will be directly related to the answer you gave the first time you asked the question. For example, if you are getting started, a start-up loan is what you need. If you are hoping to expand or buy equipment, you need an expansion or equipment loan. If you are strapped for cash, you may be looking at a small business line-of-credit or a business credit card.

What Can You Get?
Next you have to consider what type of financing you can actually get, and with what terms. Is your business credit at a point where you will be able to find favorable rates and terms? Do you even have business credit? Is it going to be difficult to find small business financing products with favorable terms or reasonable rates for some reason?

You may not be able to answer this question until you do some research. This will likely involve conversations with multiple creditors of various types.

Cost vs. Benefit
Once you know what you need and what you can get, do a cost-benefit analysis. This is a fancy way of saying make a list of pros and cons and see which side wins. Will the cost of the loan be worth the benefit of what the financing can accomplish for you?

If you are using the financing to bridge a cash gap, do you have a plan in place to close the gap permanently? If you are taking advantage of a great deal on an inventory item, how sure are you that you can sell for a profit?

Will expansion yield the profit you need to make the loan worth the cost?

Knowing where to start when considering whether financing is right for your business is the key to making an informed decision. Realistically consider what you hope the loan will accomplish, determine if you can be approved for a loan that will accomplish the goal, and then determine if the cost of the loan is worth the benefit to the business. Then you’ll have your answer.

If you need help navigating through financial matters, a FinTech firm like can help entrepreneurs secure the capital they need for growth. By filling out just one online loan application form and uploading some documents, borrowers can be connected with lenders that are ready, willing and able to lend. Loan specialists are also available to answer questions.

Faith Stewart

Faith Stewart is a wife, mom, and freelance writer. She earned a BBA with a major in accounting and spent 10 years working in the fields of finance and accounting before pursuing her passion for helping small business owners and entrepreneurs through writing.