You’ve just qualified and been handed your business loan – whether you’ve just popped your loan cherry or it’s your fifth time around, getting your hands on funds for your business is exhilarating! And we’re excited for you! But what now? How are you going to use those funds to the absolute maximum?
Of course, the way you decide to spend your loan will depend on your industry and business but saying that, there are common and proven ways that most businesses can draw upon when it comes to how to use a business loan effectively.
So what can you use a business loan for? Here we’ll take you through not only the ways you can use a business loan but the best ways to make the most of them and make the investment worthwhile.
How to maximize your small business loan
1. Set clear business goals
Before you start deciding what you’re going to spend your newfound funds on, you’ll need to have very clear business goals laid down.
Make sure that your goals are:
- Specific – be very clear about what you want to achieve. No use in setting a goal to ‘make more revenue’ if you haven’t been specific about how you are going to achieve this, rather the goal could be ‘make more revenue by investing more heavily in marketing to achieve more leads’ or ‘hire more employees to the sales team’.
- Measurable – if the goal can’t be measured, then how do you know you are on track?
- Have a realistic deadline – one week isn’t going to flip everything around. Make sure your deadline is realistic to achieve your goal.
Take some time to sit down and think. We’re often so busy running around checking off an endless list of tasks in business that we forget to take a moment and just think. Stop. Take a moment to figure out the key areas of your business that need a boost and where injecting some cash would do the most good in order to achieve your well-defined business goals.
We advise having a plan before you receive your funds and then finalize it once you know how much money you’ve managed to lock in.
2. Facilitate growth and expansion
You’ve got your business goals in one hand and your funds in the other. Now it’s time to be the boss and plump up the areas of your business that need the most nutrition.
There are many areas of your business where you can disperse your funds, where you spread them, again, will depend on the stage your business is in. Here are some common areas of your business that you can use your funds:
What can I use a business loan for?
- Marketing – spending your loan (or part of it) on marketing could be an invaluable investment for finding new leads and customers for your business. In order to grow, you will always need to find new angles and ways of attracting customers (but don’t forget to remember your old ones!). You could do this through more social media ads, increasing your SEO, going old school and printing ads etc.
- Equipment – getting new equipment can be make or break for a business. Your industry will, of course, depend on what type of equipment you need but for example, adding another van to a plumbing business could double the usual area covered. A new industrial oven for a baker can triple the number of loaves make a day. It may be worth it investing in new equipment for your business. You may even consider a specific equipment loan.
- Inventory – for those in the field of retail, we can see your eyes widening. Stock and product are essentially the lifeline of a business, which without there would be no business. You may choose to use your funds for stock replenishment, or perhaps for bulk-purchases to get some nice discounts (just make sure you have the space to store it and that it’s a product with a short expiry, you wouldn’t want to have stock you can’t sell).
- Operational expenses – it’s not the most exciting of subjects, but bills make the world go round. There’s rent, electricity, gas, internet and then throw in all the other operational expenses (like gas etc.) and you can see where we’re going here. It all adds up. It may be wise to dedicate a portion of your funds to keep the business operational.
3. Keep your loan in a separate account
If this is an obvious point to you, then skip straight to number 4. But for those of you who haven’t thought of this, hear us out. Keeping your loan in a separate account to your usual business account can help stop you from spending too much at once, or unnecessarily spending your funds away or worse, spending it all in one go.
We advise keeping your loan in a totally separate account and transferring money across to your standard business account when needed. This way, you will always be able to keep a close eye on how much you are spending and make sure that you are keeping in line with your original goals (from point 1).
4. New funds, new ideas
Other than the usual areas mentioned, what can you use a business loan for? For those whose business is doing well – you’ve got a good customer base and sales are going strong, it might just be the right time to go back to the drawing board.
You could use your business loan for launching a new product or service.
To keep your business ahead of the game you’ll need to make sure you aren’t getting stuck in your old ways. Think long-term and think BIG. A new product or service might be just what you need to zhush things up a bit and keep up with the forever evolving market.
Then there’s the subject of technology. What are you doing today to make your business more tech-savvy? Perhaps introducing new tech such as a business accounting software will help your business to cut labor costs – it’s a very small investment that can lead to big results.
5. Loan consolidation
If you’re used to the lending world it’s very possible that your business has led you down the path of having too many debts. Having too many debts from different lenders is less economical than having a single loan where you can focus on one single repayment strategy.
You may decide to maximize your loan by refinancing your loans and consolidating them into one place – you may even be able to get yourself some nice cash savings in the process. If you’re a business owner with several outstanding debts, consider consolidating them into one place. You may be able to get a single loan with a far lower interest rate and save some money for your business.
Need a business loan?
Become can help businesses with loan consolidation and business loans. On top of that, those who apply will gain access to a tailored dashboard with unique advice on how to improve their funding odds and unlock better funding opportunities.
Disclaimer: The information contained in this article is provided for informational purposes only, should not be construed as legal advice on any subject matter and should not be relied upon as such. The author accepts no responsibility for any consequences whatsoever arising from the use of such information.