Short-term and long-term growth is how most businesses stay afloat. For many businesses, if you’re not growing, you’re losing business. It’s unlikely a business will stay at the same threshold year after year.
For some businesses, growth opportunities sometimes come knocking on your door, and you may not have the cash flow to support a large investing. It’s important to take control of your business cash flow, as we all know that success comes from managing your circumstances in business.
This is where financing the business for growth opportunities come in handy. Whether that’s through a business-specific loan, overdraft, or flexible cash flow lending, growing your business requires planning and smart financial thinking.
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Below are some of the great ways to use your business loan for growth.
Utilizing a loan for business growth and development is essential for a business. Marketing is the primary investment you ought to make using the business loan unless you have noteworthy issues somewhere else that should be settled first.
Its extraordinary marketing and promotions can define the success and failure of a business. Expanding customer base helps in increments of sales, income, and the success of your business; hence, growth marketing is a decent place to initiate.
When you’re just starting, you may not necessarily have the funds for all the basic elements your business needs to function but possessing the required equipment is crucial for a business’ success, if your business model is equipment-dependent.
For example, to design/manufacture your own products, printing materials, etc., your business requires updated equipment. This will also help achieve higher-volume orders at a quicker pace, expand income and sales, and overall growth.
“We are also seeing higher demand for lines of credit, which typically are used to finance short-term needs, such as buying or leasing equipment, purchasing a company vehicle or injecting cash into the business during a lean period, especially seasonal businesses,” says Jay DesMarteau, head of commercial bank specialty segments at TD Bank.
Operational and Soft Costs
Early-stage businesses will often use their funds for operational requisites such as buying inventory and building products. Instead of hard physical resources or products, soft costs are those costs that don’t help manufacture a product or provide service directly, yet are crucial for continuous business operations.
This incorporates things like licenses and the expert’s fee. This could likewise cover expenses for counsels like CPAs, lawyers, and brokers.
“Maximise the use of capital,” says Isaac Rodriguez, CEO of Provident Loan Society.
“For example, don’t just pay legal fees and get tax returns done – explore how those professionals can help grow your business through referrals, recommendations, introductions, etc.”
Technology plays an integral role in most modern businesses, be it a small store or a giant software startup. In fact, even those businesses that aren’t centered around a tech product may also require to put resources into hardware and software to make their day-to-day operations more productive.
“Traditionally, businesses come to us when they need to expand, whether they have outgrown their space, are increasing their production capabilities, or [are] adding staff,” says David Reiling, CEO of Minnesota-based Sunrise Bank.
“Recently, there has been a change, with a large number of businesses investing in their technology infrastructure to keep pace with growing digitalization.”
Payroll and hiring
A company is only as strong as the people behind. Investing in hiring can be an extraordinary approach to enable your business to develop. Using your loan money for payroll and hiring is another step to growing your business.
“True growth means spending funds to add employees who can take over some tasks such as bookkeeping or ordering supplies and help support the daily functions,” says DesMarteau.
“This will allow the business owner to better focus on long-term strategy and driving profitable revenue growth.”
Isaac Rodriguez notes that as a not-for-profit collateral lender, most of his organization’s loans are made for short-term expenses such as meeting payroll.
Continuing business growth is vital to your success, so don’t be afraid to take the steps you need to facilitate that growth. While financing isn’t the answer to every small business problem, it’s very much possible that financing your business growth is the right decision for your business, as long as you make the right strategic approach.
If you’re honest with yourself and clear about how you’ll use the funds and your ability to pay it back, borrowed capital could be the right growth tool for your business.