How Business Loans Respond to Business Needs

Growing your business can be tricky. You have to invest in equipment, property, advertising, and various other expenses if you want your business to grow. But how can you do that when you also need to take care of the operational costs?

Until you have plenty of cash coming in, it’s almost impossible to purchase more equipment and whatnot to improve your productivity and profitability.

Fortunately, business loans exist. Specifically designed to support business operations and growth, these types of financing can be used for various business purposes

Business loans help your business run better, faster, and more profitably in several ways, including:

1. Acquiring More Inventory

To keep up with the demands from your customers or clients, you need to continuously replenish your inventory with new varieties and high-quality products, whether they’re raw materials, semi-finished goods, spare parts, or intermediate goods. This can be difficult to do when you need to purchase large amounts of inventory but your business is not making enough money yet and you don’t have enough cash on hand.

If you’re running a seasonal business, you may also struggle to replenish your inventory during the slow seasons. While you’re not making enough money during these times, you need to prepare early for the huge demand during the preceding holiday or tourist seasons.

With a business loan, you can buy the necessary inventory while allotting your working capital on operational expenses.

Pro Tip:

To determine whether an inventory loan is ideal for your business, compare the total cost you need to borrow against your total projected sales for a specific period. Do you think you can repay the loan with the sales you’re expecting to make soon?

2. Grow Your Workforce

Sooner or later, you would need more talent to help your business expand and become more profitable. You may have started it on your own but as your business grows, you’re going to need more people to do the bookkeeping, marketing, customer service, and even develop more products and services for your business.

It pays well for your business to invest in talent. Not only will your operations become more efficient, but you can also keep your business competitive and innovation if you have a lot of skilled and experienced employees to get inputs from. As your employees do what they’re supposed to do to keep your business running and thriving, you can also focus on planning and strategising.

If you don’t want to touch your working capital for hiring new employees, a business loan can provide you with the much-needed funds to hire and train more people.

3. Develop More Products and Services

You would need more money to buy more products or launch new services. Sometimes, going in this direction is crucial to stay competitive and relevant in your industry. It can also increase interest and traffic for your business, especially if your biggest competitors do not provide them.

Without enough cash on hand, however, your best alternative to providing more products and services is to acquire a loan.

4. Buy or Upgrade Equipment

Businesses need equipment to smoothly operate. These can range from commercial vehicles to tools and machinery to computers and software applications. Aside from acquiring new equipment, you also need to update or upgrade these pieces of equipment after some time.

Equipment can be expensive and depreciate over time, which means that buying and upgrading them can be difficult if you do not have enough working capital at hand.

With chattel mortgage and equipment financing, however, you can buy or update commercial vehicles and much-needed machinery even when you do not have enough money in the bank to make the purchase. These loans can help finance your purchase. The cars and equipment you're buying can also be used as collateral for your loan, helping lower your interest rates.

5. Strengthen Your Marketing Strategies

You need a solid budget and expert help to launch a successful marketing campaign, regardless if its through traditional channels like TV and radio or via digital marketing.

While you can promote and advertise your product without charge on social media, your reach is limited to a few numbers of people unless you pay for advertising. Aside from reaching out to more potential customers, paid advertising also helps you focus your budget only on your target market. This can help you generate leads and increase sales in a shorter time than in traditional marketing.

Additionally, you can also build a website for your business and promote your brand on various other digital channels, such as search engines, email and mobile apps.

A business loan can help you fortify your marketing efforts by investing in marketing. With access to more capital, you have more opportunities to grow your business through marketing.

6. Business Expansion

Just because your business is ready for expansion doesn’t mean you have the cash on hand to make it happen. If you're short on cash to build the additional property in a new location or branching into a new market, you would need a loan to finance your big move.

Generally, business expansion can be very costly. The upfront costs alone of buying new facilities and equipment alone can be difficult to cover, preventing many businesses from expanding even though it can substantially increase profitability.

A business loan can help businesses expand and increase their customer base without using too much money from their bank account.

Pro Tip:

Will opening a new store branch in a new location be profitable enough to cover your loan costs? Is it a great spot for your target market? Before taking out a loan for business expansion, have a solid plan of what and how the money will be used for, as well as whether it’s really beneficial. Determine the potential change in revenue that could come from it. Then, compare your revenue forecast against your existing balance sheet to see how the expansion would affect your bottom line.

7. Grab Business Opportunities

You’ll never know when a great business opportunity knocks up and your door. Maybe it’s a huge discount on a fleet you’re planning to buy or an emergency home makeover for a rich client that’s willing to pay you big as long as you can work around the deadline. These limited-time offers are just too good to pass up. Without the available money to buy the fleet or the necessary tools and materials for your home renovation project, however, you would have no choice but to pass up...

Or you can take out a business loan! If you believe that the potential return on investment outweighs the total cost of financing, getting a business loan is a smart move. Just make sure to get good estimates or calculations of your debt and potential revenue. Try not to be overenthusiastic that you’d end up overestimating the potential profit. Do a revenue forecast to get the hard numbers that you will use as the basis for your decisions instead of on simply relying on your gut instinct.

8. Establish Creditworthiness

Your business needs to have an impressive credit profile and good credit score to easily secure financing in the future. Aside from using a business credit card, maintaining positive cash flow, and paying your bills on time, a business loan can also help build your business credit as long you make your monthly repayments on time and complete your loan on the agreed period.

While traditional financing institutions like banks rarely approve small businesses and startups for business financing, you can get a smaller loan amount from online lenders. You may need to pledge an asset as collateral for the loan, but as long as you’re able to follow the repayment schedules and pay off your debt on its due date, you won’t lose your asset.

Getting a business loan can also help you establish a good relationship with a specific lender, which is likely to lend you a bigger loan in the future. Just try not to miss out on your repayments or, worst, take out financing you can’t afford. Records of late repayment or default can have a significant negative impact of your credit score and creditworthiness.

Going into debt can be a smart move if it means being able to grow your business. If you’re ready to expand or grab profit-making opportunities but don’t have the money to do so, don’t hesitate to get a business loan. Call us on 1300 722 210 now!