The best time to borrow money for your business is now

MATHIEU STERN-UNSPLASH

AApplying for a business loan is not the best experience for most Filipino small and medium enterprises (SMEs). Many SMEs complain about the lengthy application process, extensive documentation requirements, and reduced likelihood of obtaining funding approval. Rather than jump through these hurdles, business owners prefer to dip into savings or borrow directly from family and friends.

However, if your business needs additional funds to grow, the best time to get a business loan is now. The money available means you can prepare for – or even take advantage of – a mix offlshareholder pressures and business opportunities to come in the following months.

See the following reasons why a business loan now rather than later is the best decision:

Another round of interest rate hikes will make borrowing more expensive.

Inflation is on the rise worldwide – not just in the Philippines – largely due to multiple international factors that have impacted the domestic economy. This pushed the interest rate on loans up to 3.25% in July.

Furthermore, the Bangko Sentral ng Pilipinas (BSP) did not rule out further interest rate hikes at its next policy meeting on August 18. IfIf financial institutions look to BSP rates as a benchmark for loan and credit card rates, another interest rate hike will make loans even more expensive in August.

You’ll get the most out of your business investments now rather than later.

Although nothing is certain, the government fully expects the nationalflRation rates on the rise – even raising the forecast for 2022 to 4.5%-5.5% in July. Based on this data, you better make major purchases as soon as possible.

This is explained by the concept of “time value of money” in economics, which simply means that the value of money decreases over time. 1 million peso financing will buy more today than if you waited another six months. Also, the sooner you invest that money in your business, the sooner you will get returns. Since inflation will also lead to a future decline in economic and consumer spending, these returns may offset a possible decline in sales.

Once you have a loan, what business investments should you focus on? Real estate is perhaps the most obvious, as it’s a good hedge against inflation – but if it’s not benefiting your bottom line over the next few months, don’t force it. Instead, focus on spending and investing that will increase your business’s revenue and its relevance to customers. It could be increasing gear, technology, or inventory to prepare for your busiest seasons; close business leads; or streamline your business operations and processes to increase overall productivity and efficiency.

You can secure your business against further inflaction shocks.

Financing assistance and tax breaks may have been offered to SMEs during the worst of the pandemic-related lockdowns. But if inflation continues for the rest of the year, SMEs will not be able to enjoy the same benefits, even if they are the ones who will suffer the most due to rising prices for raw materials and labor. work, declining incomes and the need to increase wages to retain employees.

Thus, it is in every business owner’s interest to secure their business now, especially if you have a foreseeable cash shortfall in the coming months. If you wait a few more months to borrow, that need can only become urgent – ​​and you’ll align yourself with other borrowers who are also experiencing the same inflationary pressures on their business. This means you will also wait longer for your loan to be approved.

The good thing about getting a business loan now is that it doesn’t have to cost you anything. Instead of a term loan, consider a revolving line of credit: once approved, you have a pool of funds to draw from whenever a business need arises. You’ll only have to pay the amount you’ve used plus interest, making it a no-obligation way to secure your business.

A business loan is a big step forward, and it’s not always necessary to move your business forward. It requires a lot of thought, research and business planning to ensure that your funding will bring you more benefits.Ifts only headaches.

However, if you are already in the business market Ifnancing – and you get it to protect or grow your business – then take the next few days to review your finances and narrow down your business loan options. Waiting longer will cost you more.

This article reflects the personal opinion of the author and does not reflectIfsocial booth of the Management Association of the Philippines or MAP.

Benedict S. Carandang is a member of MAP. He is vice president of external relations for First Circle, a fintech provider that helps SMEs grow through long-term partnerships, flexible funding, and free tools to help them find government opportunities. This article is co-authored with Jess Jacutan, Content Marketing Manager at First Circle.

[email protected]

Benedict@firstcircle.ph

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