When Is The Right Time To Apply For Business Loans?

Any forward-thinking business owner has probably wondered when the best time to take out business loans is. The simple answer is that the best time is when you don’t need a loan. However, this varies from industry to industry. When deciding if it is the right time to take out a loan, consider why you are searching for it. If you need it to pay off existing debt or as a short-term solution to a long-term problem with no real business plan, seek credit counseling. Refinancing may make your debt repayment more affordable, but you cannot borrow your way out of debt.

Why Apply For Business Loans? 

There are several reasons to apply for business loans. A popular reason for small business owners to take out loans is to establish credit. If your business is financially solid, but you may need a loan in the future to purchase a new asset, borrow now and build your credit history up by making payments on time every time. The better your credit score, the larger loan amounts you will be approved for and the lower the interest rates you can expect.


If you have received a business offer you cannot turn down but do not have the working capital to fund it, seek business loans. Explain to the loan officer how this business loan will help you acquire resources which you can turn into revenue. Include a plan of future cash flow and how you will pay the loan back on time.


All businesses have recurring bills whether they have paying customers or not. Business loans can help your company get through a few slower months. Put the loan in a savings account, and use it to smooth out cash flow so you can pay your employees on time.


Expansion is one of the best reasons to take out small business loans. Maybe your massage service has grown too large for your one-bedroom apartment. Or maybe you offer bookkeeping, payroll, and tax services and have more clients than your current staff can handle. Or perhaps you need more raw materials to meet the demand for your hot product. Expansion allows you to increase monthly revenue on a significant scale, so you can pay your loan off quickly and stress-free.

Busy Season

Many industries have busy seasons during which time they need more employees than usual. For tax accounting firms, this is usually January through mid-April. There is the need for bookkeepers to clean the books up so they can be used to draw data from accurately. Auditors are needed to verify the validity of account balances. Tax preparers are needed to process the data. Businesses have nine months from the end of their fiscal year to file their tax returns, but most file by March 31st.

When Should I Apply For Loans? 

Apply for business loans before you need them. Sometimes this is not feasible as golden opportunities can come up out of the blue. However, if you have been in business for a few years, you can look back at your monthly cash flow statements and see during which months you were strapped for cash.

Entertainment Industry

The entertainment, recreation, and hospitality industries will follow similar trends in your local area. If you rent beach houses, you will see the most business during the summer and may need a loan to help you pay your mortgage during the winter. Similarly, if you own a hotel a few miles from a ski slope, you may need help smoothing out your cash flow during the summer. If you need to hire more staff to help you through the busy season, start looking for business loans in the fall, so you have plenty of time to shop around for the best rates and terms.

 Financial Services Industry

With the busy season in the financial services industry comes extra employees to pay. On top of your salaried professionals, you probably have temporary workers to help with the filing, data entry, and other administrative tasks. If you find yourself in a bind, you can seek an accounts receivable financing loan which allows you to borrow against outstanding invoices to other businesses.

However, between interest and fees, this can be an expensive option. If you know that you historically pay overdraft fees to make payroll, shop around for small business loans in October or November. If you have a client you struggle to collect from, consider invoice factoring which is a company purchasing your accounts receivables and collecting directly from the customer on your behalf.

Bottom Line

If it’s not too late, the best time to take out business loans is before you need them. If you need to take out a loan for an off-season or busy season, shop around for the best rates and terms several months in advance. Be prepared to explain to the loan officer how this loan will allow your company to generate more revenue and what your plan is to pay it back.

Take out a small business loan to build your credit so you can get better rates in the future, but never take out a loan to pay back debt you cannot afford. When used responsibly, a small business loan is a great way to smooth out cash flow, prepare for the unexpected, and finance assets, inventory, and raw materials.