You’ve been approved for a business loan. Congratulations! That’s the hard part…or was it?
Now that your new funds are at your fingertips, you may be realizing that the battle has only just begun. Your next big challenge is deciding how to put those funds to the best possible use and realize a healthy return on investment.
How you decide to deploy your funds will always vary depending on your business, situation, and industry. That said, there are a few common things you’ll want to consider as you begin using this new capital.
Two central questions to start with are: First, how will I use this loan for my business—in one main area or spread across a few? And second, how will I repay it?
Here we’ll take you through how to use your first business loan effectively to get the most out of those hard-won funds.
1. Don’t lose sight of long-term costs
Your bank account feels full right now, but you’ll still need to think about cutting costs and planning your budget. You may have the funds to cover your expenses today, but you can never be too prepared for a future financial emergency. Put some money aside and build your safety net. Your future self will thank you.
2. Make a constructive plan
No matter what your business, it’s important to plan. Figure out the area (or areas) of your business that would benefit the most from an infusion of cash.
What this means for you will vary depending on your business stage and situation. A few common areas to focus on include:
Stock and product are vital for the normal functioning of your business and it’s likely that this is where your loan will be spent, especially if you’re in the retail field. Using your funds to replenish your stock and purchase inventory can be a great way to manage seasonal dips and even try out new products.
Consider whether it’s time to purchase new equipment. Depending on your industry, that might include a new van for your delivery company or a new piece of machinery for your construction company. Equipment is often the driving force behind growth that can take your business to a whole new level, either by increasing your efficiency or allowing you to take on more clients.
- Operational expenses
Whether it’s rent for a physical space, gas, utilities, internet services and more, at the end of the day, it all adds up. Before you know it those regular operational expenses can snowball out of control so it may be wise to delegate a portion of your loan towards keeping those lights on.
- Marketing and advertising
You may decide that using some of your loan for marketing is a valuable investment for expanding and drawing in new customers. After all, to grow your business you’ll need to get new customers through the door and stay memorable to old ones. This might mean investing in search engine advertising, print ads, or customer appreciation events.
All of these areas can be great places to invest, whether you’re focusing on one of these key areas or spreading your business loan across a few. It all depends on what makes the most sense for your business.
The key point here is that you’ll need a game plan detailing exactly how you’re going to strategically spend your loan. We propose that you have your plan ready before you receive the funds (and then finalize it once you know exactly how much you’re qualified to receive).
3. Launch a new product or service
Already have a loyal customer base and strong sales? Sounds like your business is in good shape. For a business owner in this position, especially if competition is on the rise, it might just be the right time to launch a new product or service.
If you want to grow a long-term, sustainable business, you’ll need to stay one step ahead and not only think about next year but the next five years and beyond. A new product or service might be just what you need to keep old customers loyal and keep up with the forever evolving market.
4. Pay off other debts or refinance
If you’re not a first-timer when it comes to receiving financing, it may be that you have some debts. Borrowing from a large range of lenders, however, is often less economical than having a single loan, with a single repayment strategy.
Paying off old debts or consolidating your loans into one place will make it easier for you to manage and budget for payments, rather than juggling several different debts at various times of the month. Not only that, you may be able to find some significant cash savings in the process.
If you have several outstanding debts, take a look at all the interest rates and payments. Consolidating your debt into a single loan that charges a lower interest rate could be a great move for your business.
Getting your first loan
Now that you know which areas of your business to focus on when you receive your very first business loan, it’s time to get your hands on the funds in the first place.
For more info, check out this guide to business funding.
This guest post was written by Annabelle Amery for Lending Express. With one application, Lending Express uses AI technology to match businesses seeking funding with one of its 35+ partners (including Fundbox).