The majority of businesses grow past the point where the owners seriously have to think about borrowing money to keep operations going. You might experience a brief shortage or you might not be able to keep up with the rising demand for your products and services. Maybe you want to jump on an opportunity to buy new office equipment, warehouse inventory, or stock up on basic materials, or possibly buy another business.

So, do you think borrowing money for you business is a good idea? There are no straight answers. If you play your cards right, and in ideal circumstances, borrowing can be just what you need to learn how to manage better and expand even more. Sure, there is a price to pay, and paying too much or struggling through payments that aren’t organized properly can become the thing that slowly backs you into a financial corner.

The Benefits of Borrowing
A big question when it comes to borrowing is how you'll use the money and create a way to pay it back.

The motivation behind borrowing is to pay for capital items, such as a building, office equipment, vehicles, and computers. It makes financial sense to acquire these things even if you don’t have enough money to pay for them right now. A loan can allow you to use the money you have right now to pay for monthly expenses incurred in managing your company.

In a nutshell, you’re probably better off using your own cash to pay for capital expenses, such as rent, employees, and supplies, instead of putting it toward long-term goals. Remember to match your business loan to your needs, as in, don’t pay for technology with an average lifespan of 2 years with a 5-year loan.

There will come a time when it makes logical sense to borrow money to pay for daily expenses. A temporary loan or a credit card can reinvigorate slow cash flow. This usually happens to manufacturers who must purchase raw materials beforehand but won’t receive payment for their hard work until weeks later.

Work a Model
Before you borrow any money, it’s a good idea to outline a working cash flow model so you have enough cash to keep on going while paying down your debt. This will help project your monthly incoming cash so you’re ready for anything and know how to keep operations running, whether you need to borrow more or lower expenses.

If you have to borrow more money to keep the lights on, for more supplies, or to back existing capital, schedule a meeting with your banker. You should bring along your business plan and up-to-date financial statements, plus your cash flow plan, and be ready to explain how you will use the money. Your investment banker will let you know if a business loan what you need and, if it is, how much and what terms fit your circumstances.

Bootstrap Your Business
There is a way to find money for your business without asking anyone at all. It’s known as bootstrapping, which is looking for extra money that’s been a part of your business all along.

The first area to look over is your credit and collection procedures. Do you think your credit terms are being enforced? Are you knocking down doors for past-due receivables? If you have 30-day terms and you’re paying 2 weeks before the due date, you’re limiting your cash flow. Expanding your cash flow by accelerating collections and easing payables might be the thing that saves you from financing altogether.