How to make the most of your small business loan

Getting approved for a small business loan is only half the battle. Here’s what you need to do next.

Business loans are different from personal loans in a lot of ways, but the key difference is that the funds are essentially an investment. The way you use your business loan funds may be the difference between you increasing your profits and you defaulting on the loan.

So, how should you make the most of your business loan?

Buy new equipment

construction equipmentPurchasing equipment can take your operations to a new level, whether it’s industrial equipment or a new point-of-sale (POS) system. If you’re currently leasing equipment it can also assist your cash flow as you won’t have to make regular lease payments.

When considering whether or not to purchase equipment with your loan funds, look at how much you’ve been approved for and consider how much you really need the new equipment. There’s no need to spend your funds just because you have them.

Invest in your online presence

conducting business onlineHaving an online presence, whether it’s a website or a social media page, is invaluable these days. This is despite less than half of Australian small and medium businesses actually having a website. By establishing and maintaining a website and social pages, you can increase your customer base and also your marketing capabilities. However, you may need outside help to do this.

Consider the costs of getting yourself set up and the ongoing costs of maintaining a website and social page before you splash out with your business loan funds.

Invest in marketing

marketersMarketing can be make or break for many businesses and ignoring marketing activities due to the associated costs can lead to a downturn in business.

Whether it’s online marketing, an ad campaign or getting some PR expertise, you need money to get started. Make sure you choose the right type of marketing for your business to ensure you get the best return.

Expand your operations

opening a shopIf your business is doing well it might be wise to use your loan funds to expand. You could consider opening up a new retail location, a second warehouse, a new office space or even start selling online products overseas.

Expanding your customer base is always a win, just ensure you’ve done your research so the investment is worth it.

Cover your cash flow fluctuations

business cash flowCash flow is an issue for many small- to medium-sized Australian businesses. Delayed payments can mean your business is left without vital cash flow for up to 90 or even 120 days. Depending on what type of business loan you have, you might be considering using it to cover gaps in cash flow.

For example, a line of credit loan is ideal to use in this way, but a lump sum loan may not be. Using your funds to cover cash flow means you can continue operating as normal and repay the funds once you get paid. This is a common strategy, in fact, it’s how invoice financing works.

Is there anything else to consider?

Before using your funds, consider all of your options (those above plus any others you see as viable) and work out what will be best for your business. Consider getting expert advice before deciding and work out some cash flow projections to ensure you’re not putting your business in a difficult situation.

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