A business loan is one of the most effective ways to access the funds you need to take your business to new heights! Chances are that you might have big plans for your business. However, you might find it difficult to get your hands on the funds you need to achieve your business goals, particularly if you’re a new business owner. Even if your business is quite established, a business loan might still be a great idea as you might not want to dip into cash reserves.
These days, it’s easier than ever to take a business loan with the rise in technological advancements. The turnaround time for business loans can be as low as a couple hours. This makes business loans an attractive option for aspiring entrepreneurs. Some popular options for entrepreneurs who are looking to take a business loan are Neogrowth and IIFL business loans.
However, it’s important to remember that a business is a type of debt and needs to be effectively leveraged. So, it’s crucial that you put a business plan in place before taking on any debt. Here are some effective ways to use your business loan funds:
- Expand Operations
If you run a brick-and-mortar business, it might be lucrative to set up new branches. You can also consider expanding or renovating your existing store to drive sales.
Apart from setting up new brick-and-mortar stores, you can also consider expanding operations by setting up new storage facilities, manufacturing units, etc. If you’re looking to expand your operations, you can consider taking IIFL business loans.
- Replace or Upgrade Equipment
If you’re engaged in the manufacturing business, then your manufacturing units and equipment are the lifelines of your business. These days, with rapid advancements in technology, upgrading your equipment is crucial. Upgrading your equipment can also help you increase efficiency, optimise processes and double down on production. A cost-benefit analysis could help you make an informed decision.
- Purchase of Inventory
If you’re a product-based business, some funding can help you purchase new inventory. Having the right amount of funding can help you purchase your inventory in bulk which can help drive down overall costs. Apart from taking a business loan to fund your inventory purchases, you can also maintain a revolving credit with your financial partner.
- Hire and Train Staff
A dedicated and capable workforce is crucial to any business’ success. But, hiring and training staff can be an expensive process. This is especially true if your business is one that requires constant learning and development. Investing in your workforce will certainly pay off in the long run. If you’re unable to find funds in your budget for this very crucial exercise, you should consider taking a business loan to empower your workforce.
If you’ve decided that it might be a good idea to take a business loan, then the next order of business is to analyse industry standards for business loans and make an informed decision. Here are some things to consider before taking a business loan:
- Understand your repayment capability
It’s likely that your business already has a number of fixed and variable costs. Bear in mind that a business loan can add to your cash inflow but once the repayment period starts, your EMIs will add to your costs. So, it’s imperative that you analyse your finances and understand how much you can comfortably borrow. You can also adjust your repayment tenure depending on your repayment capabilities. Extending your loan repayment tenure can help bring down the monthly repayments but you will likely end up paying more in interest. A good repayment plan is one that’s sustainable for you.
- Explore Repayment Options
Generally, business loans come with flexible repayment options. This can include customisable repayments where you can increase or decrease your monthly repayments depending on your business’ performance. You can also choose a business loan lender that lets you make foreclosures and prepayments.
- Credit Score
A credit score is one of the most important factors that lenders take into consideration when deciding whether or not to extend a line of credit to you. A good credit score will certainly help you get a business loan relatively quickly and easily. However, if your credit score is not very favourable, you should consider building your credit score before applying for a loan. This is because a good credit score will also help you negotiate better terms with your lender. Better terms can include lowered interest rates, flexible repayment period, higher loan amount, processing fee waivers and much more. Additionally, having a bad credit score also means that your loan application may get rejected, which can drive your credit score further down.
- Interest Rates
Before taking any loan, it’s important to shop around a little bit. This will help you understand the industry averages for interest rates, processing fees, turnaround time, etc. It’s particularly important that you compare and contrast the interest rates offered by different financial institutions because this will help you identify lenders that are offering lower interest rates. A lower rate of interest can make a huge difference in your finances. So, take your time and make sure you’ve exercised due diligence before finalising your lending partner.
A business loan can help you take your business to the next level and help you achieve your business goals. As beneficial as a business loan can be, it’s imperative that you understand that a business loan is still a debt. This means that you need to be very mindful of how much loan you take and how these funds are being leveraged. Consider the pointers presented in this article to make the most of business loans.
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