- Most business loans are put towards buying new company equipment – but there are so many more ways to invest in your business.
- Even budding entrepreneurs can take out a business loan to kickstart their dream career.
- A business loan isn’t always for investment purposes – you can use it to steady your cash flow when seasonality strikes.
Congratulations are in order – you’ve managed to secure a business loan! Especially for startups and burgeoning small businesses, that’s no small task. After all, only one-third of approved business loans go to companies younger than three years old.
But now that you’ve acquired the necessary funding, what should you do with it? It’s all well and good to say you’ll invest that loan back into the business for future growth, but what exactly does that mean?
There are hundreds of ways you could spend your loan, but not every investment will have a positive outcome. So why not consider these 11 ways to put your business loan to good use?
1. Steady your cash flow
Whether you’ve put up an asset as collateral to secure your business loan or instead accepted a higher interest rate for an unsecured loan, one of the most common uses of that money is to steady your cash flow.
For retail businesses, this is particularly crucial. Thanks to the seasonality of shopping, especially around the booms of Christmas and the lows of tax time, retail operators are at the mercy of fluctuations completely beyond their control.
A business loan could be used to steady the ship when approaching choppy waters. So don’t fall into the trap of having to spend your business loan on new equipment or new hires – especially if your bottom line has been lingering in the red for a few months.
2. Purchase new property
Is your current property meeting your – and your customers’ – demands? Is there enough room for the whole team to do their jobs competently? Is there extra space for when new hires enter the mix? Are you in the ideal location for your clients and customers to reach you?
If not, it might be worth investigating whether a premises shift could do your wonders for your business. Shopfronts obviously need to be in prime locations where customers can come into the store and purchase goods and services, but offices – especially for small businesses – aren’t under the same restrictions.
Maybe you’re based in the city but rent is crazy. Would a move to bigger premises in an inner suburb help your bottom line? Or maybe most of your clients are based in one location but you’re on the other side of town. Would moving closer to accommodate them help boost business?
There are a variety of reasons why you might want to buy a new property – especially if you no longer want to throw money at a commercial lease – so consider whether your business loan could be invested in real estate.
3. Buy essential items
Essential inventory depends on what it is you do and what products or services you sell. Upgrades could mean buying a new in-house printer, modernising your employees’ suite of desktop PCs, or even buying up extra stock in preparation for a big few months of sales.
Generally, however, business loans are taken out to purchase equipment and vehicles.
If you’re in the manufacturing business and your machinery is behind the competition, it won’t be long before that gap is reflected in your sales figures. On the other hand, business trips around the country could be costing you an arm and a leg with expensive flights. Would investing in a fleet of vehicles slash that cost while also making your employees feel more in control when travelling for work?
4. Hire more staff
Just because business is booming, that doesn’t mean you can’t take advantage of a business loan. In fact, when profits are high is exactly the right time to apply for a loan. With such a healthy business history you’ll be more likely to get approval, and with everyone run off their feet you’ll need to put that money to good use.
Using a business loan to invest in more staff means you don’t have to dip into your own funds to take care of their payroll. Rather, you can use the loan instead and then (hopefully) watch as your new employees help grow the business further, thus increasing your bottom line.
5. Upgrade the business
Upgrading your business may involve focusing on one of two things:
Infrastructure: For businesses operating in a hyper-connected business world, such as in technology, finance, marketing and communications, having the right digital solutions is essential for staying ahead of the competition. You could use your business loan to invest in new technologies, better hardware and cutting-edge customer solutions like artificial intelligence and machine learning.
Expansion: Rather than simply moving to a new location, it might be time to expand your operations. Could you seriously increase your profitability by franchising your company or opening a new office in a different location? It’s certainly a juggle, but there’s a reason why some of the biggest companies in Australia have multiple locations throughout the country.
6. Refurbish or invest in a new fitout for your workplace
If branching out with a new office is slightly beyond your means – even with the assistance of a business loan – then you can still put that money towards revamping your current space.
Think about how much your clients would love visiting your refurbished office space – not to mention the boost it would give your staff. Or maybe the communal kitchen could use a bit of an upgrade. You don’t need to put your whole loan amount towards refurbishing or adding new fitouts, but consider how it could help your business in more ways than simply better sales.
7. Invest in your marketing strategy
It may be a good idea to house your team in the highest-quality facility or franchise your business right across the country, but without a solid marketing strategy all that investment will be for naught.
You might already have your own marketing division, in which case – fantastic! But for most small businesses and entrepreneurs, those duties fall solely on you.
With a business loan, you could use that extra cash to hire a marketing expert to put your brand in front of new audiences. This might involve a content marketing strategy, a social media blitz, or even traditional advertising on TV, radio and billboards.
They say you’ve got to spend money to make money – and when it comes to marketing, it’s more often than not a wise investment.
8. Purchase business supplies
An extra hit of cash from a business loan can do wonders for retail owners who need to buy in bulk before the holiday season arrives.
Similarly, business owners who run an office can use a loan to stock up on essential supplies when there’s a sale happening. Printer ink, paper, USBs, even peripherals for your workplace – if you have the money to buy up this necessary stock when it’s cheap, you won’t have to fork out the big bucks down the track when you run out of paper or your best salesperson’s computer breaks down.
9. Acquire a competitor
This isn’t a step you should take on a whim. Rather, the decision to use a business loan to acquire a competitor should be the final checkbox in a long-term growth and acquisition strategy.
If you think you’re ready to absorb the competition – and you’ve worked with a financial advisor to build a solid business plan for taking on such a large disruption to your day-to-day operations – then a business loan could help you penetrate a new region while simultaneously eliminating an adversary.
10. Clear any debts
Sometimes you know a big customer payment is set to arrive but it won’t be for another few weeks or months. While that doesn’t mean your business is in trouble, you still have your own suppliers to pay.
In the interim, a business loan can be used to clear any urgent debt repayments. Since the business loan itself will come with its own terms beyond your other debts, you can use the incoming funds from clients to pay back your business loan without incurring any further interest costs.
11. Make your startup dream come true
But what if you don’t exactly have a business yet? You don’t need to take out a personal loan to finance your new operation. Instead, plenty of lenders now provide startup loans for budding entrepreneurs.
Of course you’ll need to use any funds from a business loan only for your business, but it could be exactly what you need to wave goodbye to your day job and kickstart your dream career.
Not quite ready for a business loan? Start with a business credit card instead.
If the idea of giving a helping hand to your cash flow, buying office equipment and business supplies and keeping your head above water until your debtors pay up sounds appealing, but you’re not ready to take the plunge into a formal loan agreement, consider applying for a business credit card. You will effectively secure a revolving line of credit for your business, and may also score some perks, like rewards or frequent flyer points, that will reduce your business costs.
Have you ever taken out a business loan or used a business credit card to invest in your company? Whether it was to grow your organisation, steady your cash flow or invest in new technology, share your story by commenting below.