Small entrepreneurs often need an injection of cash to grow their businesses. In that respect, we lend them for businesses are the best solution. However, no one is attracted to the idea of repaying the interest on a loan. While it is true that interest payments can be higher than what some traditional banks charge, you should consider this problem from a different point of view. Randall Castillo Ortega, the founder of RACO Investments and a lender to SMEs in Costa Rica and Panama, discusses how to use a private business loan to grow a business.
The question you should ask yourself when applying for a loan is, will the benefit my company get from using borrowed money be greater than my interest payments? If yes, then you may consider your interest rate to be fair. It’s definitely a good idea to go ahead and borrow the money your company needs.
Now that you’re ready to get a business loan, you need to look at the best way to invest it. Of course, it all depends on several factors, such as your needs, how much money you receive and what your goal is. “I recommend that you calculate the earnings you will earn using the ROI formula before investing your loan. This way, you’ll make sure success is in your future,” asserts Castillo.
It is essential to update from time to time the machinery and equipment you use in your business. If you use old, unhealthy instruments and tools, your productivity may decrease. In addition, you will offer a bad image if your company is customer-oriented. A business loan can be the perfect solution when you need to buy new equipment. The new equipment can increase your income and earnings, and you can use the extra money you generate to repay the loan.
Do you know the term “2/10 net 30”? It is a form of payment offered by many suppliers, and that carries advantages. It means that if you pay within ten days of your purchase, you can get a 2% discount. The other option you have is to pay the full amount in 30 days. Do the math for yourself. It may make sense to get a loan to pay your suppliers early to get a discount.
The most effective way to grow your business is to sell more; it’s that simple. But how to get it? Successful entrepreneurs know that a well-focused marketing campaign can drive their sales. But traditional marketing methods and even digital marketing methods require investment. A loan used for this purpose can be an excellent investment as it will generate additional sales.
Relatively small spending on business technology systems can give you huge benefits. “Consider purchasing a good Point of Sales (POS) system and a Customer Relationship Management (CRM) system if you don’t already have them,” says Castillo. “You will be surprised by the information and all the advantages that these tools can provide you.”
With business lending, you can grow your business by expanding your geographic coverage. This doesn’t necessarily mean you open a new office or a new location, or rent an additional warehouse for your products. You can expand your business by expanding the radius of your potential customers, targeting customers in a nearby location through advertisements in the appropriate media. You can also launch an online ad campaign targeting a larger audience.
It is common for a company to go through slow periods or low activity. Sales and therefore revenue can decline in certain months considerably. Still, you must continue to cover your fixed costs. You must pay wages, utility bills, rent, and other administrative expenses. Business lenders can help you meet your financial commitments. Once your business recovers, you can refund the borrowed amount.
If you’re in the business services industry, you can sell credit to your customers. Imagine you’re a wholesaler who sells your products to restaurants. You can beat your competition by offering more attractive credit terms. In addition, existing customers may elect to buy in larger quantities if you accept more extended credit payment periods. While this could mean higher sales and profits, it can also put your cash flow in a delicate situation. That’s where we lend them to companies that can provide you with a solution. If you decide to adopt this strategy, do so with caution. In your quest to increase sales volumes, don’t go too far by providing terms to your customers. In some cases, by waiting too long for your payments, you could harm the business. At the very least, it could end up being a nuisance.
One of the biggest challenges facing any company is finding new customers. If you succeed, you can be sure of success. But how can you identify potential new customers and convince them to buy from you? The answer will depend on the type of business you have. You may need to call hundreds or thousands of potential customers over the phone. You may need to offer free samples of your product. Or sometimes, you may need to hire a business consultant. All of these activities come at a cost, and you may not have enough money. A loan could provide you with the funds you need. Investment may not produce immediate results, but if your strategy is successful, you’ll make long-term profits.
Getting a loan for businesses and paying them on time can be a great way to build your business credit history. By doing so, you’ll create a strong record of payments made to your lenders. It will also help you improve your credit score. If you’re thinking of borrowing funds to grow your business in the near future, a higher credit score could be critical to getting quick approval and lower interest rates.
A superior product or better service can attract more customers. Your investment to improve your product or service can help you get more customers and grow your business. Concludes Castillo, “Remember that you may not need drastic changes to the products you offer. Often, something as simple as a change in packaging or an improvement in just one particular aspect of your products can result in an increase in your sales.”