How to Strategically Leverage Debt to Grow Your Business
Every business owner wants their venture to succeed and thrive in their chosen industry. Sometimes taking on debt and leveraging it to grow your business can be a valid strategy.
The question now is, “How can you grow a business by leveraging debt?”
Here’s everything you need to know about how to grow a business, particularly by using working capital such as small business loans.
Proven Methods of Growing Your Business
The best methods for growing a successful business will depend on a variety of factors.
However, there are proven methods you can try for a more strategic approach to growth. These can help your business to grow sustainably.
Here are some common business growing methods.
1. Hire the right people for your small team
Plenty of skilled individuals can help your venture grow, even if you’re running a small business operation. They can give you new ideas and insight into how you can grow your company. Make sure to compensate them well so they can commit and connect with your company.
2. Practice corporate social responsibility
Customers like to support businesses that provide products and services in a way that resonate with them. You can connect with them by switching to more sustainable products and practices or finding ways to give back to the community.
3. Improve your customer relationship management
One method of retaining customers is to be open to customer feedback. This can help you gain insight, allowing you to enhance your business’s performance.
4. Branch out and franchise your establishment
This can be challenging for a new business, but it can be something to include in your business plan for the future.
5. Be adaptable
How your company functions in the early stages will likely be similar to everyone else in the industry. However, it’s best to be open to fresh ideas. This allows you to cater to existing customers while attracting new ones.
6. Upgrade your systems
Invest in equipment upgrades to provide your customer base with a better product or service. It’s also best to integrate accounting software that allows you to see your company’s figures with the push of a button.
7. Invest in solid marketing strategies
Digital marketing and the use of social media have become the fastest and easiest way to reach potential customers. Invest in people, technology, and targeted ads to help you reach out to these customers and boost your sales.
8. Establish a customer loyalty program
Besides reaching out to new customers, cultivating existing customer relationships is essential. Loyalty programs are common with retail stores because they allow for an improved customer experience and help enhance customer retention. However, these programs can be used for almost any service. They can encourage your current customers to stay and help you form a positive relationship with them.
9. Know everything about your own business
All small business owners should know their company inside and out. If you want to own a business, you must know everything it entails: sales volume, lead generation, marketing efforts, different price points, and your target market.
10. Attend networking events
Many businesses rely on increasing their connections to accelerate growth. Attending networking events can help you learn from other businesses and find people who can invest in your venture. You can also host events to do this or to reach out to more customers who may find interest in your services or products.
Importance of Using Debt to Grow Business
The strategies listed often rely significantly on loans, especially in a business’s early years.
These loans can provide the capital a company needs and arm a small business with the funds they need to cater to the needs of its market.
Not all business owners have the money to start or upgrade a business. That’s why loaning has been a possible solution for many owners to get their ventures off the ground.
If used correctly, invested in assets such as equipment or technology that can drive up sales and revenue, and paid on time, any debt can help grow a business while building a credit history at the same time.
How to Use Debt to Grow Your Business
Whenever you take out a loan, ensure it goes to expenses that help grow a business, not cover other loans.
Hire an accountant to track your debts, their use, and repayment terms. They can implement a system to utilise your money more efficiently.
Maintain a good history to get better offers and maintain good credit.
Benefits of Using Debt to Grow Business
These are the common ways in which you can benefit from using debt (such as a loan from Lumi) to grow your business:
- You can quickly secure capital to upgrade your business and its equipment.
- It can improve your cash flow, especially during slow months.
- It can fund the implementation of your marketing plan to reach potential clients.
- Many lenders provide quick access to cash for more urgent needs.
- Debts are flexible and can be tailored to your business needs, whether for the present or the future.
If you play your cards right and are smart with your loan, you can quickly grow business using your debt.
Considerations When Using Debt to Achieve Business Growth
While loans can be an effective method for growth, you would also need to consider the negatives that can come with them.
These are the most common factors you would need to consider before you take out a loan for business growth:
- You might borrow too much to cover previous loans and your running expenses.
- Interest rates are constantly changing and affecting your business’s repayment methods.
- You might be unable to repay your loan IF your company fails.
- A sudden increase in market share can result in unsustainable growth and company failure.
Proceed with caution when relying on debt to help your business grow and know your limits.
FAQs
Here are the answers to some common questions on how to grow a business using working capital.
How Do I Find a Legitimate Lender?
Verify if your lender is licensed to offer credit under the National Consumer Credit Protection Act of 2009 and the Australian Securities and Investments Commission.
Besides these accreditations, it’s best to research and look into what other business owners have to say about them.
Should I Borrow From a Bank or an Alternative Lender?
Banks tend to have stricter requirements that newer businesses might be unable to meet.
You can also try loaning from Lumi, which provides financial support to small businesses of any background.
Our flexible loan offers can help you grow your business on your terms to reach new markets in no time.
It will depend on what your business needs.
Conclusion
Small businesses can often move quicker and in a more accessible way compared to larger companies. However, success doesn’t happen overnight.
Small business leaders can take their business to new heights by making the most out of business loans and being strategic about leveraging such debt for business growth.
Disclaimer: The information on this the website is for general educational purposes and not to be taken as financial, tax or legal advice. It doesn’t take your personal circumstances into account, so you should consider whether it applies to you and your specific needs. We recommend you seek professional advice when making legal, financial and tax decisions. We strive to provide accurate, up-to-date information and disclaim liability (except which cannot be legally excluded) for inaccuracies, errors, or omission the result in any losses or damages, caused directly or indirectly, by applying this information.
