In theory, there is no reason businesses need to operate according to the calendar year. While we, as individuals, celebrate the New Year at the start of January, most businesses see it as nothing more than a holiday. This makes sense when you consider how difficult trying to wrap a financial year’s end during the holidays season would be. Which is why most companies and even the IRS consider the financial new year to take place in much quieter months like February and April. As such, small business owners who want to expand their business operations should be in no rush to do so at the start of a year, but should rather consolidate at that time and push forward a few months later.
When working on growing your business, you may need some extra funds. In fact, it’s hard to think of any start up that doesn’t need as much extra funds as possible. If so, you could benefit greatly from a business loan to inject some much needed capital into your nascent business. You can click through to compare the best business loans. Once you find a loan that suits you, you don’t have to rush but can choose to wait and weigh all your options before applying.
However, there are reasons that taking out a business loan in Q1 is a good idea. Even if your business does not care for the calendar year, individuals do. Here is why you should consider taking a business loan during Q1.
Predict Client Behavior
The reality is that the world takes the New Year very seriously, even if you don’t. This is not necessarily because they want to but can just as easily be something that is simply expected of them. People just happen to act a certain way when it comes to communal events and milestones. In December, just about everyone gets into a festive mood, regardless of whether the holidays have any religious significance to them or not. In many ways, it’s the commercial high point of the year. People spend money erratically, often on things they don’t need, even if they have been particularly frugal the rest of the year. Unless you are selling goods particularly related to this time of year, your potential clients are unpredictable.
However, at the start of the year, once everything has calmed down, you can look ahead and make relatively accurate predictions about client behavior. Instead of risking your expansion measures later on in the year, taking out a loan in Q1 gives you time to bring in the profits you know you can count on. In particular, you can expect clients to create financial new year’s resolutions for themselves and that can include anything from greater caution with how they spend their money to wanting to invest more wisely than they have in the past. This sort of predictability makes it much easier to take calculated risks with your own business.
As a business, it is not only individual client behavior you have to keep in mind. You’re going to be doing a lot of business with other businesses, whether you are contracting construction companies or buying stock. Whatever the case is, you need to know that they are going to be available to see to your needs at a decent price and with a reliability that you simply don’t get either during the mayhem of the holiday period or during the more wearying later months of the year.
Unlike between Thanksgiving and New Years, during Q1, other businesses are going to be fairly reliable. They are not taking time off for any major holidays, they are less likely to have supply-chain issues, and the individuals in those companies will hopefully be refreshed after winter’s break and a new year. By taking a loan in Q1, you ensure that you can use the funds to pay for what you need. Otherwise, you might start paying back the loan before you’ve benefited from it.
The Tax Year
It is also important to remember that the tax year starts in January. By taking out a loan in Q1, you are making it easier for yourself to calculate your taxes at the end of the year, without having to worry about it falling over two separate tax years. Your expansion or growth can be seen in the context of the calendar year.
Your financial health as a company can be viewed more easily in this context and you can plan accordingly. This year’s budget, for example, will include your business loan, while next year’s budget will be informed by your growth in income as well as your monthly loan payments. It’s a simple act that will provide major fiscal and, yes, psychological benefits to have your affairs in order like this.
Technically, there is no reason you have to take out a business loan in Q1. However, this can make it easier to take control over your year ahead.