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When a Loan Is the Right Move for Your Business

Every business needs adequate funding to survive and grow. Ideally, your operations provide enough cash flow to handle all your funding needs. But for many a small business, cash flow isn’t always enough to satisfy the need for working capital. That’s when it’s time to consider a business loan. Let’s look at a few scenarios in which a business loan is the prudent decision.

Purchasing Equipment

Your business may require expensive or specialized equipment. In addition, you may already own equipment that no longer provides the performance you require. If you feel you are losing sales or profit margin because you lack the right equipment, you owe your business the opportunity to compete using the most appropriate gear. Sometimes, equipment manufacturers or commercial suppliers will offer financing, sometimes not. A business loan used to finance much-needed equipment is a terrific idea.

Expansion

Your product or service is selling like hotcakes, and you know you could grow the business by expanding operations and/or enlarging your selling floor. If you need more or better space, it’s going to cost money. For example, you might benefit by making leasehold improvements to your brick-and-mortar store. Or you might want to open additional stores or move from your current location to something larger and more upscale. You are looking at a number of one-time costs, which is the type of challenge that a business loan can solve. The extra profits you earn through expansion will help you accelerate your loan repayment.

Unexpected Opportunities

It really hurts when a rare opportunity comes your way but you don’t have the capital to take advantage of it. For example, one of your suppliers might have cash flow problems that causes it to offer you inventory at a sharply marked-down price. You need money to purchase the inventory, and perhaps to pay for additional storage space. You know that this will pay off handsomely, so you arrange a business loan to grab the deal before someone else gets it. That’s a smart move.

Fresh Talent

Perhaps you run the type of business where the caliber of your top employees is critical to your success. If you’ve been the typical owner, you’ve had to wear many hats to launch your business and keep it running. You and your staff are overworked, and you can’t afford anyone to burn out, including yourself. In other words, you need to recruit some fresh talent because you know it will increase your revenues and/or reduce your expenses. A business loan can help pay for incentives to hire the right employees. Remember, if you don’t hire the person, your competitor might.

Acquisitions

If you’ve been successful running your business, it’s possible you’ve taken some market share away from the competition. Or perhaps you’ve been eyeing an operating business that complements your own. In many circumstances, a business merger/acquisition is the right way to go. It makes sense to fund an acquisition with debt if it will lead to increased market penetration, greater geographic scope, obtaining key assets, or expanding your business to related markets. You’ll need funding not only to buy the target company, but also to make changes to your own operations to accommodate your revised environment. You may need to increase your marketing budget or add management talent. A business loan is completely justified under these circumstances.

Seasonality

If your business suffers from uneven cash flows due to seasonality, a business loan can provide cash to help you withstand slow business periods. You should be able to repay your loan once the busy season returns. For example, you might need to furlough some employees, but want to continue to offer them health insurance. Or you want to buy inventory during the slow season because it’s cheapest then. Use a business loan to smooth out the seasonal revenue ebbs and flows that would otherwise threaten your company’s survival.

Conclusion

There are many circumstances that justify a loan for your small business. What is never justified is settling for a slow, overpriced loan. IOU Financial offers fast loans with convenient repayment options that won’t disrupt your operations. Our loan rates are extremely competitive, and we can say yes when banks say no. Contact us today to discuss how we can help you fund your business quickly and efficiently.

4 Ways Business Loans Support Your Financial Status & Help You Achieve Your Goals

There are a plethora business opportunities in the world today, many of which did not exist decades ago. As technology advances, many digital trends influence the types of businesses that pop up. Even on social media platforms, there are businesses that cover how best to manage social walls and increase followers. One thing is important in all these, whether you are an online merchant or a manufacturer of kitchen wares, whether you render services or sell products, the core of business strength is capital.

The truth is every business needs a solid financial status to be able to thrive. Sometimes, there might be some hitches in the running of a business- like low inventory, the need to hire staff and grow sales, or the need to carry out a profitable marketing campaign. Considering a business loan might be recommended. Although some individuals try to be cautious, there are immense benefits that getting a loan offers.

4 Ways that Business Loans are Beneficial to You

Not every reason is valid enough to seek a loan. However, there are solid reasons that support this. Just like making a purchase comes with costs and benefits, getting a loan can have a positive impact on business when weighed against the cost. Here are 4 ways that this can benefit your business;

Expansion of Business Activities

More customers are coming into your store and you need more staff to cater for the increase in activities, or you need to add a new location to your business, or there are new products and services that your business can provide- if this is the case, you might need to expand your business to accommodate more hands on deck, or have new space for business activities.

It might be very demanding on the finances of your business when it comes to bearing the cost of adding another location or venturing into a new market, even though these moves can boost the profitability of your business.

Getting a loan can ease these processes by providing ready capital for new overhead and upfront costs. In considering this, it is important to have a proper plan and forecast to ensure that the new activity would be profitable enough to cover the repayment of the loan.

Increased Liquidity

For many businesses, inventory is an important component of commercial activities. It is important to keep your inventory replenished and of high quality. With a sales projection, you can forecast the profitability of acquiring more inventory and improvement in cash flow can help you achieve this.

Apart from inventory, day-to-day activities are also crucial to businesses; you might need to train staff, pay salaries or effect repairs on machineries. Loans can improve your liquidity and help you cover these activities smoothly.

Invest in Marketing

Marketing can be the very approach your business needs to pull in more potential customers. However, due to the cost that marketing entails, some businesses tend to put it on hold. This is because successful marketing campaigns require a tangible budget.

Since marketing is needed to spur business growth, investing in a campaign can increase your customer base. Taking up a loan can help you execute a solid marketing strategy, thereby increasing customers and improving the financial status of your business.

You Keep the Profits

Compared to getting investors for your business, one benefit that loans offer is that the profit you make is retained for you and your business. On the other hand, investors require that they have a share in the profits of your business.

With loans, you can venture into new business opportunities, expand your business or get needed equipment, all of which are beneficial to you in the long run even after the loan payments are made.

Every business needs financing no matter the nature. Although some are of the opinion that adding debt counters the growth of your business, with the right approach, debt financing can come in handy and boost your profitability. Not every business needs to take up a loan. There are several things to consider such as the terms of repayment and interest rate. It also requires proper planning and knowledge of the market so as to ensure that the profitability of the business can cover loan repayments and keep you in an excellent financial standing.

Every business envisages steady growth. With the above put in place, loans can improve your financial status and help you achieve goals. Its benefits can still be visible even after the loan has been cleared.

Guest Post: About the Author

Ali Khan is a Search Engine Optimization (SEO) specialist and a content marketer. He works as a search director in a reputable organization. His main area of interest is digital marketing management and SEO outreach. He writes unique and research driven content about SEO analysis, Social media, Physical fitness and more.

How to Reduce Small Business Debt

Your business can quickly spiral out of control if debt climbs to unsupportable levels. Sudden shocks are much harder to absorb if your cash flow is already tied up in debt service. The best remedy is to pay down your debt methodically. Insolvency and bankruptcy leave economic and psychological scars that you should work hard to avoid. Here are some ways to reduce business debt and improve your company’s finances:

  1. Update Your Budget: When you find it hard to pay monthly bills, sit down and review your budget. See where the cash inflows are failing to meet expectations and where expenses exceed the budgeted amounts. If the changes seem permanent, update your financial plan accordingly. Typically, the changes will involve variable expenses — changes to fixed costs should not come as a surprise, but in any case should be reflected in your budget and financial plan immediately. A revenue shortfall needs to be analyzed to see whether it is a temporary blip or a permanent change. Revise your budget so that you can continue to pay down your debt.
  2. Cut Expenses: You can devote more money to repaying debt by reducing your expenses. Think of cuts that will not cripple your business, such as unnecessary rented space, professional memberships, non-critical travel, non-essential employees or work hours and delayable inventory purchases. The trick is to make cuts that will increase net profits. For example, if you cut too much inventory, you may not be able to sustain your sales revenue. If you lay off too many employees, you may lose your operational edge. In some cases, it might be cheaper to use contract employees. If you explain the problems to your employees, they may agree to pay cuts until things begin to look up. If you have discretion over employer payments to workplace pension plans, omit your matching payments this year. With the advent of Obamacare, you might consider terminating your company’s health insurance plan. Offer incentives to higher-paid employees to take early retirement.
  3. Increase Revenue: Offer markdowns, volume discounts and better terms for cash payments. Speak with customers and see if they would be willing to move up the timing of their regular orders. If possible, increase marketing and advertising to stimulate sales. You might want to factor your accounts receivable to collect revenue sooner. Sell off assets you no longer need. Concentrate on inventory items with the biggest margins. You might have some goods or services that don’t really generate profits, so replace them with higher-margin alternatives. Introduce loyalty programs that reward repeat customers with special discounts and deals. If you run a brick-and-mortar retail business, perhaps you can expand into online operations and even begin selling to international customers. Online selling is very economical and can allow you to cut your fixed costs.
  4. Work with Vendors: Often, vendors will respond positively to requests to delay payments and may even float you a note for three to six months. It’s in vendors interests for your business to survive, so don’t be shy about negotiating with them. Prioritize vendor payments based on which ones have to be paid first.

Consolidate Your Debt: If you owe money to several creditors, you may be spending too much each month on minimum payments. Take out an affordable small business loan from IOU Financial to pay off your other debt. IOU Financial makes repayment easy by automatically collecting your payments daily directly from your checking account. This removes the scary prospect of large monthly payments and thus makes it much easier to budget.

 

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