Before applying for a business loan, it's wise to create a detailed plan on how you will spend the funds that are borrowed. This helps ensure that you obtain sufficient funding at a competitive rate.
Utilize a business loan calculator to estimate how much of your monthly earnings you can allocate towards loan payments, and integrate this amount into your budget.
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Increase Your Buying Power
Purchasing power refers to how many goods or services your business can purchase with an amount of money. A small business loan can increase this purchasing power by enabling bulk orders or taking advantage of discounts available with larger orders.
Increased buying power can help combat inflation. Rising raw material and labor costs decrease margins. With a small business loan, your buying power increases and this enables you to buy more raw materials and labor at reduced costs, thus increasing profit margins and driving sales growth.
An updated monthly budget is key when managing a small business loan. Knowing your actual cash flow can help avoid overrelying on loans; looking for ways to save interest by consolidating debt or prepaying early may also be useful in keeping expenses under control and improving credit scores.
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Increase Your Marketing Capabilities
Utilizing your small business loan for marketing investment will allow you to attract new customers while remaining memorable to existing ones. This could involve spending on search engine optimization, print ads or customer appreciation events.
An SBA business loan could also help you purchase equipment or processes to make your product or service more effective, leading to increased profits while decreasing labour costs and employee stress levels.
Your small business loan could also help refresh your website, something every company should invest in as it creates an excellent first impression with customers and is essential to having an established digital presence. You could access one through a revolving line of credit, business credit card or longer-term loans such as term loans or merchant cash advances - which Nav can recommend depending on your specific needs.
Increase Your Sales Capabilities
Small business loans can help expand sales capabilities by expanding product or service lines, intensifying marketing campaigns or hiring additional staff. When done in an effective and strategic manner, these investments can lead to increased revenue and long-term business success.
Before applying for a small business loan, it's crucial that you create an action plan stipulating exactly how you will use the funds strategically. Ideally this should be in place before receiving any funds as well as being regularly reviewed as your business evolves.
Maintain a wise loan management strategy by setting aside your loan into its own bank account, only using it when necessary and only drawing down on it when needed - this helps prevent "spending creep," in which daily expenses eat into the balance and diminish future investments. Furthermore, prioritizing loan payments within your business budget ensures debt repayment stays on schedule, thus maximising return from small business loans.
Increase Your Inventory Capabilities
Secure a loan for your small business can be seen as an investment, and to maximize its returns it's essential that funds be directed into areas which promise a high rate of return, such as growth opportunities or cost cutting strategies that could reduce expenses over time.
By keeping meticulous records, bookkeeping can help you gain an accurate picture of your cash flow across months and seasons, so that your loan repayment strategy can be adjusted appropriately. Furthermore, bookkeeping will prevent spending categories from mixing up or misuse of loan funds.
Inventory financing options vary for those searching for inventory financing, from business lines of credit and business credit cards which offer greater flexibility than traditional loans to longer-term business loans and equipment financing. Invoice factoring offers fast funding while mitigating risk with outstanding invoices being used as collateral against lenders' risk. Alternatively, government-backed financing may also be available through the U.S. Small Business Administration or private investor backed investments through SBICs.
