Before taking the plunge and applying for a loan, many small business owners wonder exactly what their loan can be used for, along with how it can help to boost their SME.
Today, we’ve outlined 15 of the most common ways you can use small business loans to help your venture (just in case you’re in need of some ideas!).
1. Increase working capital
Working capital is important, as it’s the money your small business has on hand to cover day-to-day expenses. This capital can act as a safety net during tough times, or even for unexpected problems which may arise. Having enough capital available is the difference between a business sinking or swimming, so a loan can quickly ensure your business keeps afloat.
2. Buy equipment or machinery
Is there a piece of equipment or machinery that can make your process much quicker and easier? While the new purchase may be expensive, it’s highly necessary to streamline your workflow and produce a much better experience for your customers.
3. Moving to larger premises
If you run a startup, you may have begun it in your very own garage or home office. Therefore, it’s understandable that as soon as your venture grows, you’ll want to upsize to a new premise. Small business loans can give you the quick injection of cash you need to do just that.
4. Expanding to another location
Once your small enterprise grows into a medium enterprise, you may even want to expand and set up additional locations. This is another expense that you can use a business loan for, particularly as expansion can be a costly, yet rewarding exercise for your venture.
Perhaps you love your existing business space, but it’s in need of a dire upgrade. You can also use the funds you receive from a small business loan to pay for renovation costs. Whether it’s a small tweak or extensive changes, having that quick injection of cash on-hand can certainly go a long way.
6. Cover cash flow fluctuations
It isn’t unusual for a small business to experience fluctuations in cash flow at various points throughout the year. For example, sales may dramatically pick-up near Christmas time, only to majorly decrease during the middle of the year. These fluctuations can leave a business owner feeling anxious, but this is where small business loans can come in handy. The funds you receive can cover these cash shortfalls, allowing you to upkeep the daily expenses of your business (such as paying staff wages or purchasing inventory).
7. Buy inventory or stock
Speaking of purchasing inventory, this is another important way that you can use your business loan. In order for your business to run smoothly, you’ll need to have healthy supplies of inventory and stock. If funds are running low, so too might your stock, but the funding from a loan can quickly remedy this issue.
8. Hire new employees
In order to grow your business, you’ll also need to expand your staff. Like everything though, hiring new employees costs money. This is where a business loan comes in handy, as it allows you to cover new employee wages, especially until you’re turning over enough money in your business to finally do so without assistance.
9. Pay existing employees
Perhaps you’re not considering hiring new employees, but simply want to ensure you have enough cash flow to pay your existing ones. While covering the costs of employee wages might not be an issue for the majority of the year, it can become a concern during quieter periods when you’re making less sales. Rather than having to let go of a great staff member, a business loan can give you the funds you need – and quickly, too.
10. Take advantage of a new business opportunity
What happens when an exciting new business opportunity comes by that’s just too good to miss? If you don’t have the required funds on hand, you can apply for a small business loan to help you out, particularly if you know you’ll easily make the repayments.
11. Advertising and marketing
One of the biggest mistakes a small business owner can make is assuming that advertising and marketing isn’t worth spending money on. Without both of these, your business simply isn’t reaching its full potential, nor is it likely to grow. If you’re short on cashflow but wish to make your business boom, then a loan can help you focus on these vital areas of promotion.
12. Buy out a competitor
If business really is booming, then you might be in a good position to buy out one of your major competitors. Understandably, such a big investment could drastically affect your working capital. If this is the case, a business loan can ensure you make the purchase without affecting the financial health of your business.
13. Pay BAS or tax payments
Have you got a particularly large tax bill after the recent financial year? Another way in which a loan can come in handy is to help you pay your BAS or tax payments, without you having to dip into your existing business finances. This ensures the smooth running of your business, whilst keeping on top of your tax bill.
14. Purchase new furniture or fixtures
Perhaps your workspace doesn’t need a full-on renovation but is just in need of a furniture or fixture upgrade. While these expenses can be costly, a business loan can help you make the necessary changes without going broke.
15. Invent or create a new product
If you’ve got a fantastic new idea for expanding your current product range, but require extra funds to go ahead with it, then a loan can help you out. It can give you the quick financial assistance you need to take your idea and run with it, hopefully creating plenty of profit once it’s launched.
These are just 15 of the most common ways you can use small business loans to help your SME, but if you have any other ideas, we’d love to hear from you in the comments section below.
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