In an ideal world, you would never need to borrow money from a bank or a financial institution to grow your business. Entrepreneurs would always have a sufficient amount of funds at their disposal. Whenever a new opportunity that required additional investment presented itself, they would be able to capitalize on it by withdrawing the required sum from their bank accounts.
Unfortunately, that’s not how the real world works.
If you are a small business owner you may need a cash injection to grow your business. A loan can provide the best solution. However, entrepreneurs can balk at the need to pay the interest that every loan carries. While it’s true that interest payments do eat into your profits, you need to look at this issue from a different angle.
The question that you should ask yourself before taking a loan is, “Will the monetary benefit that my business gets by deploying the borrowed funds, exceed my interest payouts?”. If your answer is in the affirmative, then you can consider your interest rate to be fair. Definitely, you should go ahead and borrow the money that your business needs.
How can your company use the money that it borrows? We’re not short of ideas. Just keep reading.
20 Different Ways to Put a Loan to Good Use and Grow Your Business
1. Buy new equipment
It’s essential to upgrade the machinery and equipment that you use to grow your business. If you use old and dilapidated gadgets and tools, it’s likely that your productivity will fall. Additionally, it will create a poor impression in customer-facing businesses.
But the problem is that purchasing machinery can be expensive. You have to invest a significant amount up front. You can always ask the vendor if they provide financing through monthly payments. If this is not possible, consider a business loan from Camino Financial as your second best option. A loan can provide the perfect solution when it comes to buying equipment. The new equipment will help to boost your revenues and profits, and the extra cash that you generate can be used to repay the loan. That was the case of Rafael Reynoso, who used a business loan to buy a new smog check machine for his garage business. This new machine produces now $300-400 dollars a day. That’s more than enough not only to repay the loan but also to generate a wide profit.
2. Pay your suppliers early to earn discounts
Are you familiar with the term 2/10 net 30? This is a facility offered by many suppliers. What it means is that if you pay within ten days of making a purchase, you can earn a discount of 2%. The other option that you have is to pay the full amount in 30 days.
Do the math for yourself. It may make sense to take a loan to pay a vendor early.
3. Step up your marketing efforts
The most effective way to grow your business is to sell more. How can you do this? Entrepreneurs know that a focused marketing campaign can boost sales. But traditional marketing methods and even digital marketing require an investment to be made. A loan taken for this purpose can pay for itself many times over by generating additional sales volumes.
4. Hire additional workers
Depending on your type of business, you may manage with just a few employees or even just by yourself. But some businesses receive more customers at certain times of the day (like a restaurant or a coffee shop) or certain periods of the year (like a tax preparation business). Hiring more workers can make a difference, especially if your business is customer oriented. You simply don’t want to offer your customers a poor image of your business. Also, if you overload your current employees with work because there’s no one else to do it, they will grow disgruntled and your turnover rate will eventually grow. A business loan can help you get the money you need to hire and properly train your new employees. With prepared staff, you’ll experience an immediate difference and you’ll grow your business fast.
Follow the example of Leticia Michel, who runs a tax preparation services practice. Hers is a very seasonal business, and during “busy season,” Leticia realized she wasn’t offering her clients the best customer service and also her small team was getting overworked. Leticia used a small business loan to hire 3 new employees and train them to offer best-in-class customer service. Since then, she has experienced a 49% increase in business operating income
5. Invest in technology
A relatively small outlay on business technology systems can provide tremendous benefits to grow your business. Consider buying a good point of sale system (POS) and a customer relationship management system (CRM) if you don’t already have one. The insights and advantages that you gain by using these tools could surprise you.
6. Expand into a new territory
It’s possible to grow your business by increasing your geographical coverage. This doesn’t necessarily mean setting up a new office or renting an additional warehouse. You could target customers in a neighboring city or town by placing advertisements in the appropriate media. It is also possible to launch a targeted online advertising campaign.
7. Add new lines to your product range
This technique to grow your business builds on its existing strengths. Say, you have a pool of loyal customers who regularly buy from you. Is there a new product or service that you could introduce to them? The advantage that you have is that your clients know you and trust you. However, that doesn’t mean that you will get away by offering an inferior product or one that doesn’t meet their requirements.
It would probably be a good idea to conduct some research before you make the investment that introducing a new product will require. Does it fill a market need? Is it as good as the competition’s product? Have you priced it appropriately? The success of your investment will depend on correctly answering these questions before you commit yourself.
8. Buy inventory in bulk
Sometimes you can get an opportunity to buy inventory at a substantial discount. If you make the purchase, you are assured of a considerable profit in the months ahead. But the seller may stipulate that you need to place a large order and pay for it immediately. In this situation, how will you arrange the money?
A line of credit or a short-term loan could provide the answer. You will benefit even if you have to pay a high-interest rate. Just remember that the amount that you pay as interest should be less than your anticipated profit on the transaction.
That was the case of Baldemar Ramírez, the owner of Mireyes Instalaciones (a small business installing and servicing mechanic repair equipment). Before getting a loan, Baldemar felt frustrated trying to finish jobs with no parts or driving a long time to pick them up. So he used a loan to purchase the parts in bulk and get bulk pricing. Now he doesn’t turn away business because he doesn’t have the parts on site, and he has saved 10 hours a week in commuting back and forth to get the parts.
9. Buy out a competitor’s business
You can use a loan to buy out a competitor’s company. This is possibly the fastest way to grow your business. Of course, it is vital to carry out careful due diligence before you make the purchase.
10. Pay off a high-cost loan
It may seem counterintuitive to borrow to pay off an existing loan. But it could be a step that could save you a great deal of money.
Consider the example of Diego, who runs a small construction business. One of his clients delayed payments for several months. Consequently, Diego couldn’t pay his workers their wages. In desperation Diego asked his wife, an office assistant in a small firm, to borrow from a payday lender. Diego used this money to pay a part of the wages that were due to his employees.
But Diego soon realized that the payday loan carried an interest cost of over 100%! He quickly applied for a loan from an online lender and used the funds to repay his wife’s loan.
11. Set up/improve your company’s website
If your company does not have a website, it’s high time that you get one. Small businesses with an online presence are perceived to be more credible than firms that don’t appear in a Google search. Money spent on digital marketing and on sprucing up your website usually yields disproportionately high returns. If you don’t have the cash, making this investment with borrowed funds can help you to grow your business.
12. Use a loan to get through slow temporary periods
Do you operate in a seasonal industry? Or is your business dependent on a few large customers? Some of your big clients often delay their payments?
There are times when a business may go through a slow period. Sales may taper off in certain months.
But you will still have to meet your fixed costs. Wages, utility bills, rent, and other administrative expenses will have to be paid. A loan can help you to keep your financial commitments. You can repay the borrowed amount when business picks up.
13. Boost your revenues by selling on credit
If you operate in the business-to-business segment, you could be selling on credit to your customers. This would be the case of a wholesaler of produce that sells to restaurants. There are going to be times when a new client considers switching over from the competition provided you offer attractive credit terms. Your existing customers may increase purchase volumes if you agree to a longer credit period.
While this could mean higher sales and profits, it could also put a strain on your cash flow. A working capital loan could provide a solution. However, you should adopt this strategy with caution. In your eagerness to boost sales volumes don’t push too hard. You could find yourself spending a great deal of time following up for your payments.
14. Increase business volumes
In any business, the most significant constraint is finding new customers. If you can do this, and you also manage the other activities of your company reasonably well, you are assured of success. But how can you identify new clients and convince them to buy from you?
The answer to this question could depend on the type of business that you operate in. You may need to call hundreds or thousands of prospective clients on the phone. Offering free samples of your product may be necessary. At times, you could benefit from hiring a business consultant.
All these activities have a cost, but you may not have enough money to pay for them. A loan could provide the funds that you need. Utilizing the borrowed money in this manner may not yield immediate results, but if your strategy is sound, you could gain in the long term.
15. Buy new furniture
If you own a customer-facing business like a restaurant or a retail store, your success is influenced to a great extent by the impression that you create in the clients’ minds. Shabby interiors and old furniture will reflect poorly on your business. Spending money on improvements can provide lasting benefits.
Meet Óscar López, who purchased an existing sandwich shop, Deli 23, in Los Angeles, CA. The business was operating but was in need of some serious renovations. Óscar used a business loan to buy new equipment for the deli, and new tables and chairs for the dining area. He also invested in the storefront to bring in more foot traffic. These changes have brought more clients, better reviews, and have generated more profit.
16. Build your credit
Taking a business loan and repaying it on time can be an excellent way to build your credit history. If you do this, you will create a successful record of repayments with the lender. It will also help to improve your credit score. If you need to borrow funds to grow your business at a later date, a higher credit score could be instrumental in getting you quick approval and a lower rate of interest.
17. Purchase inventory
Certain types of retail businesses need to stock up on inventory in preparation for the busy season. You don’t want a customer to walk into your store and leave because of the non-availability of the correct type or color of merchandise. An inventory loan can help you maximize sales by ensuring that your store is well stocked.
18. Open in a new location
It’s possible to grow your business exponentially by opening up new markets. Consider a storefront business that operates successfully in a specific area. The business owner could double sales by opening a similar store at a new location. Of course, this would involve a significant investment. If you are confident that this strategy would work for you, it is one of the fastest ways to grow your business.
Remember Óscar López? The loan he initially got help boost his business and profits: now he has plans to expand Deli 23 throughout San Francisco, California.
19. Train your employees
Your workers should have the skills and knowledge that they need to carry out their role effectively. One way to ensure this is to hire individuals who possess the relevant experience. But it is also crucial to provide your employees with training. The money that you spend on this should be viewed as an investment in human resources.
If you don’t have the cash to pay for training programs, consider taking a loan. Providing your workers with training programs will build loyalty and help motivate and encourage your employees. Most importantly, it will enable your employees to discharge their duties in a better manner.
20. Improve your product or service
A superior product or one that delivers higher value will attract more customers. The investment that you make to improve your product or service can help you to gain market share and grow your business. Remember that it may not be necessary to make drastic changes. Often, a minor tweak like a change in packaging or a focus on a different attribute of your product can result in an improvement in sales.
Ready to grow your business? We can help
Does your business need a cash infusion? A small business loan from Camino Financial could be your best option. The advantages of dealing with Camino Financial include:
⇨ You can apply even if you have bad credit.
⇨ You don’t need to put up any collateral.
⇨ An application will not affect your credit score.
Our loan process is fast, easy, and secure. All that you have to do is to submit an online application. It will take just a few minutes, and you will be immediately informed if you are pre-qualified. A business loan specialist will get in touch and guide you through the loan process.
Need to know more? Check out our Ultimate Guide to Get a Business Loan.