All Stories

How good debt can fuel your business growth

Presented by the WEOC National Loan Program

Bootstrapping your business is often seen as an entrepreneurial badge of honour, but there’s also something to be said for personal financial stability. While building from the ground up fosters resilience, there comes a point when strategic borrowing is needed for your next phase of growth. We know, it sounds intimidating, but hear us out!

In this post we’ll break down the reality of debt and the key considerations you need to keep in mind before taking on a business loan.

So, you’re ready to grow — now what?

Imagine you’ve polished up your business plan and set ambitious expansion goals. Bootstrapping might require years of saving to acquire the necessary equipment or implement a large-scale marketing campaign.

A strategic business loan allows you to invest in tangible growth opportunities sooner. A boost in capital can provide a significant time advantage, enabling you to achieve your business goals more rapidly and effectively.

Many of Canada’s most successful female-led businesses have leveraged loans to catalyze their growth. Here’s a great success story of Kreativemum Facepainting used a $30,000 business loan to double their staff and relocate to a studio with three times more space.

Good vs bad debt

We’ve all seen Hollywood’s dramatic portrayal of loan sharks—but debt is actually very helpful when it comes to starting or growing your business.

Good debt: Imagine a debt that offers a return on investment (ROI) that exceeds its own cost. Good debt is used strategically to add value to your business over time, fostering growth rather than obstructing it. Business loans typically fall into this category as they provide the necessary capital to expand operations, enhance capabilities, or increase market reach—setting the stage for future profits.

Bad debt: This is the kind that drags you down. It offers no real pathway to increase your business’s value and can be detrimental to your financial stability. This includes those high-interest credit cards, payday loans with extortionate rates, or any scenario that involves losing a limb for missing a payment! These types of debts are costly and offer no return, merely eating away at your resources.

Opting for strategic loan will provide your business with a sturdy ladder to climb upwards, not a slippery slope down into more trouble.

How do business loans work?

Typically, a loan will have:

  • Principal: The amount you borrow.
  • Interest rate: The cost of borrowing which can be fixed or variable.
  • Repayment term: The duration over which the loan needs to be repaid.
  • Fees: Additional charges like origination fees or penalties for early repayment.

Loans can also be secured or unsecured. Secured loans require collateral (such as a car), while unsecured loans are based on creditworthiness.

The WEOC National Loan Program

We are proud to deliver the WEOC National Loan Program, which supports women entrepreneurs as they start, scale, grow and maintain their businesses.

The program offers an inclusive approach to lending, providing robust wrap-around services that set women entrepreneurs up for continued growth and success.

Note: We do not accept direct loan applications. You must go to your provincial member organization and they will guide you through the process.

Do I need a good credit score to get a loan?

At WEOC, no universal minimum credit score is needed for a small business loan and we also take life circumstances into account if you’ve had past credit issues.

You can read more about our loan eligibility here.

Key considerations before taking on a loan

Before you decide to take on good debt, it’s crucial to evaluate several factors to ensure it contributes positively to your business growth:

  1. Assess your financial health: Check your business’s financial statements and cash flow forecasts to gauge your repayment capability.
  2. Determine the ROI: Be clear about how the loan will be utilized and the potential returns.
  3. Understand the terms: Know what you’re signing up for—interest rates, fees, penalties, and all.
  4. Plan for repayments: Prepare to meet your debt obligations without compromising your business’s financial health.

You got this! You’ve successfully navigated your business to this point, and with the right support, you’ll continue to thrive.

WEOC’s National Loan Program is specially designed to support female entrepreneurs like you. Learn more about how our loans can help you scale and succeed.

Disclaimer: This article contains general information only, and is not general advice or personal advice.