Maximising cash flow

How to use business loans to increase business growth

There are many different ways to fund your business plans. You could use find an investor, apply for a business grant, tap into your savings, or use crowdfunding.

However, one of the most common methods for financing a current or existing business is to use business loans for growth.

Learn more about business loans in this post, and how to use them when starting a business.

What are business loans?

Business loans are loans that are specifically used to start or grow your business. These are agreements made between a business owner and a lender, such as a bank or a dedicated business loan company. All business loans require the business owner to make repayments on the amount borrowed, as well as paying interest on the amount. 

 

Advantages of using business loans

Business loans can provide a significant advantage, particularly if you are just starting up your business. 

Here are just some of the benefits:

  • Loans are convenient and easily accessible, either through your bank or a private lender.

  • They provide a fast injection of cash, which can be much needed if your business requires a significant amount of start-up capital.

  • Unlike investors, your lender does not have a say on how you spend your money. You have greater control over your plans and execution

  • All the profits go back to you.

How to grow a business using business loans

Invest in the essentials first

While it’s tempting to spend your newly-acquired funds on a large-scale marketing campaign, it’s important to focus on the basics. Ensure you have all the equipment you need, build your website, and secure enough inventory if you’re selling a physical product.

Plan your budget

Many SMEs receive a business loan then proceed to spend that money quickly. This can lead to problems in the future: an opportunity may arise, but you may not have the funds to take advantage of it.

Have a clear cash flow plan, and always look for opportunities to cut costs. Don’t forget to add a buffer for any unexpected situations that may arise.

Spread the word with marketing

Marketing is a key part of promoting your business. Once people know about your business, they’ll be more likely to consider using your services or buying your product in the future. Focus on cost-effective actions that will have a lasting impact, such as content marketing or participating in local events. A big advertising campaign may make a bang in the short term, but isn’t sustainable in the long run.

Reinvest profits back into your business

Once you have money coming in, it’s a good idea to reinvest that money into growing your business. Use the profits to increase your marketing spend, hire new employees, or expand your operations to keep up with demand.  

 

Managing business loan risk

While there are many advantages to using loans as part of your business growth strategies, they also come with more risk. 

These tips can help manage some of the risk associated with getting a business loan:

  • Schedule your repayments and set up calendar reminders so you don’t forget.

  • Put your money in a separate account.

  • Don’t ask for more than you need. Ask for enough to fund your business growth, and focus on paying that loan back.

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