A new year for many businesses marks a new beginning or a new season. While in some cases it may just be a psychologically influencing factor, in many cases, it actually makes a seasonal and financial impact. As the new year dawns in and as a lot of businesses rise through turbulent times, to get back into their stride, we discuss easy ways in which a loan or a business financing plan can help steer a business towards success. As you read on, you shall find 6 practical ways in which a loan can help your business grow in the coming new year. But first, we shall delve into why a loan could be good for your business in the first place.
Why Choose a Loan for Your Business
A business loan can serve many needs at various stages. In some way or the other, most businesses use loans for one or more of these:
- Starting a business
- Funding growth
- Sustaining a business
Typically, businesses tend to procure such funding, or loans for purposes like:
- Equipment rentals, purchases and maintenance
- Manpower hiring and salaries
- Paying utility bills
- Paying real estate expenses
- Purchasing inventories
- Maintaining healthy cash flow
- Managing emergency expenses
- Insuring the business and/or employees
- Investing in marketing and sales
- Managing expenses related to outsourcing
- Expanding operations
- Diversifying the business
- Acquiring another business
- Credit consolidation
Oftentimes in business, it takes money to make money. Loans today serve as a reliable way to procure money when needed and many businesses fuel their growth in practical ways using loaned funds. Here are 6 ways which are virtually universal and applicable to perhaps every business that exists.
1. Transitioning into Profitability
Turning a business into a profit is not always very simple. It may be that a business is in its early days, is facing a low season or has turned into a loss-making one. But turning profitable can take a combination of many things going right. One of the key things, can be the supply of enough money and for this, a loan can be one reliable source as long as a business is eligible for it. Yes, loans have costs associated with them, but many businesses profit significantly beyond the costs of a loan, using the funds borrowed. Some investments of loans that often lead to profitability include:
- Marketing expenses
- Efficient cash flow management
- Supply chain management
- Logistics management
- Distribution management
- Business acquisitions
- Inventory procurement
- Market investments
2. Helping with Equipment Hire and Maintenance
Equipment often is the key to business success – virtually every industry can stand as a testament to this truth. Being able to afford the right equipment can be absolutely crucial in the growth of a business. Many businesses today use loans and funding solutions in order to be able to afford hiring and maintaining the right equipment for their operational needs.
3. Managing Cash and Capital
One of the most important factors that keeps a business going and growing, is the effective management of cash and capital flow. Cash can be critical at almost any time in the life of a business. Oftentimes, challenges and turmoiled times can pose threat to the cash flow of a business and should anything go wrong, a downward spiral can easily be the result. On the other hand, efficient cash management turns many less profitable businesses into more profitable ones. Loans can help temporarily add cash to the rotation and the right timing of such an action can be worthwhile for a business in many situations.
4. Acquiring the Right Businesses
One of the most crucial moves in the journey of a business, can be an acquisition. Acquiring the right business at the right time and at the right value, can have virtually unmatched consequences and can be a strategic decision like none other. However, using the funds available with your business may not always be a good idea or even feasible, when it comes to an acquisition.
Debt is an instrument often used for business acquisitions and there are many reasons behind this:
- Debt can help keep the cash flow undeterred
- It can allow a business to acquire an otherwise unfeasible acquisition
- It can help keep the acquired business healthy in its capital and cash availability
- Sometimes, it can help secure the acquisition deal itself.
Hence, most businesses today take advantage of debt in the form of loans for acquiring other businesses that are seen as key to their journey.
5. Marketing and Promotions
Largely considered amongst the potentially most powerful investments toward the growth of a business, marketing and promotions are also probably the most valuable ways in which a business can use a loan. It can safely be said that the best use of business loans in recent times – in terms of return per borrowed dollar – is indeed marketing and promotions. Many businesses that invest well towards the right marketing moves or partners, often reap great benefits, which are often unmatched by the return on any other investment. Many of the world’s largest businesses have reached where they are, largely thanks to a combination of right marketing moves. Loans can help provide the funds it takes to get the right marketing and promotion going.
Considered by many business experts as the best way to ensure lasting success, business diversification can help grow a business while also reducing risk in the business. Diversification can be across multiple market segments, industries, locations, distribution channels and more. Businesses with higher diversification are often well-protected from threats caused by seasonality, market trends, catastrophes, and so on. Diversification is likely to require funds and loans are often used by businesses when investing in diversifying their products, services, markets and industries.