Good to Great of Loan for your Business Activity

You might have heard the adage that says, spend money more if you want to earn more. It is good that you are managing your business with savings that you have accumulated so far, however, have you thought about taking a loan for your business? As a growing business, don’t you think, you should go with a loan to further boost its growth. 

There would come a time in your business when you would require taking some big decisions. Of course, with big decisions, we don’t want you to gamble the future of your business— it’s simply taking such decisions which would help in expanding your business from its current state.

To grow your business, you would need to invest in equipments or manpower. The problem is that managing all these costs along with keeping aside the money for running your business can be a difficult task until you generate some revenue from your business. It is a vicious circle— You can’t grow unless you invest and how would you invest without affecting your operating expenses?

Here the solution would be a loan for your business.

The purpose of taking a loan for business shouldn’t be to dissipate it on those inventories or things which are not necessary for your business. In fact, you should take a business loan to expand and boost the different aspects of your business.

So before taking a loan, you should clearly ask yourself— “Do I need a loan for my business?” Or “Is loan for business necessary for its growth?” If you are satisfied with the answers of the above questions, apply for a business loan. Other than that, here are some of the reasons due to which you may need to apply for a loan for your business=

  1. Help with the cash flow= It is feasible to utilise the business loan either to boost revenue or gain competitive advantage. So, a company may look to launch a new product, open a new branch, add inventory to meet seasonal demand spikes, and so on. Of course, further growth is associated with many costs, like advertising, increasing staff number, etc.; and it’s unlikely, you will have cash on hand to cover such expenses unless you withdraw from the fund that you have kept for your business operations. Here, a business loan can help you. You can apply for a loan for business to cover the expenses associated with expanding the business without shelling out money from your operating funds.
  2. Maintain Inventory= While operating a business, you would need to continuously expand and replenish your inventory to meet the demand and provide better options to your customers. Sometimes, it becomes daunting to meet these expenses, especially, when it is related to the seasonal inventory. At this stage, it is good to take a loan for business to offset inventory cost and stay ahead of the trends without disrupting the cash flow. The idea is that the income generated by using this loan should be used towards its repayment.
  3. Buy Plant & Machinery= Irrespective of its size and nature, every business requires some equipments which are necessary for its smooth functioning. Then there are unexplained expenses like repair, replacement of broken machinery, etc. Business loans can help you manage the cost of equipments so that you can work in sync with the current technology and improve your interaction with your customers.
  4. Customised solutions as per needs= Business loans give the ultimate boost to your company in a more efficient manner. Not only banks, but there are also non-banking financial corporations (NBFCs) like Aditya Birla Finance Limited who believe in the uniqueness of every business and give a wide range of flexible and tailor-made products to cater to the needs of every business. With flexible tenure, most lending institutions offer business loans for up to Rs 1 You can easily opt for the most suitable loan for business as per your requirements.
  5. Collateral free finance= Business loans prove to be useful for a wide range of SMEs, like manufacturers, traders, B2B service providers, etc. Further, not only banks, but NBFCs also offer business loans without security or collateral. It means, you don’t require to pledge any property or asset to get a loan and your business would be evaluated on the basis of the cash value and expected revenue.

Undeniably, you should stay away from debt if it is not necessary, but there are times when taking a loan is imperative to keep your business afloat. Any business loan is a good loan, provided it is used for the expansion of the business. So, you should carefully weigh the cost and benefits associated with a business loan, and go with it only if it has the potential to grow your revenue.

 

Author: Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles by others on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to editor.webposts@gmail.com