How a Loan Can Bring Your Business Back on Track
A recent report says that small and medium enterprises (SMEs) are the key to help the economy recover post-COVID-19. After all, 99.8% of Australia’s businesses are classified as SMEs. This figure includes your local coffee shop, boutiques, repair services, and even electric scooter shops. However, the report also says that a collective effort from the government, businesses, and consumers is needed to recover.
Part of the solution includes recovery loans. SMEs can take out a loan from banks, public funds, creditor unions, or private investors. Depending on where a business receives a loan, the interest and fees could be high. That’s why it’s also important for businesses to consider and calculate the total interest before accepting a loan.
Once a business accepts and receives the right loan, it could unlock opportunities and allow your business to recover and grow. Here are just some of the possibilities that a loan can give your business.
Ensure cash flow
For small businesses, cash flow is a challenge, especially if the customers can’t regularly pay for your service or if there’s unsold inventory. In these situations, some business owners bridge the gap using personal capital. However, this could pose problems for business owners financially, especially in the long run.
Short-term loans are perfect solutions for these cases. It provides the funds that you need for operations and helps your business stay afloat when there’s little to no profit. A loan can help you take your mind off funding for the meantime and focus on generating revenue and making up for losses.
Help restock inventory needs
Inventory is one of the most challenging expenses to manage for businesses. Small businesses will have to invest in the products and wait until they buy them to offset the cost. Moreover, business owners will need to replenish and expand their inventory continuously to keep with demand and make more sales.
Receiving a loan will allow businesses to offset inventory costs and provide on-trend products. This is especially helpful for season inventories such as winter products. Loans for inventories are usually short-term, and most business owners repay their loans when a season is over. Having good credit with a bank increases your chances of getting this kind of short-term loan.
Add more equipment
Besides inventories, businesses may opt to invest in equipment or machinery to boost sales or expand their operations. However, buying equipment is costly and can incur expenses like repairs. By taking out a loan, you can manage equipment costs while keeping your business updated and improving your service.
One great thing about equipment loans, the equipment can also serve as collateral for a loan. Equipment loans are usually intermediate-term loans that are repaid monthly for less than three years. However, before you take out an equipment loan, make sure that you are investing in the necessary equipment that adds value to your business. This way, you maximise your loan and generate revenue from it.
Enable you to hire or rehire
Due to the pandemic, many businesses had to cut down on labour to save on costs. Now that it’s time for businesses to recover from last year’s losses, labour will be necessary for business growth. If your business relies on labour, taking out a loan will allow you to hire or re-hire staff.
Some businesses also use a loan to invest in talent to keep the business competitive and innovative. If hiring a marketing director or a financial consultant will make a difference to your bottom line, then investing in a loan to hire them will be worth it. Use the extra set of hands to get your business back on track.
Provide expansion opportunities
Finally, applying for a business loan will allow you to expand your operation or location. If your business has fully recovered and is growing steadily, expanding your business will ensure that you continue to gain profit. You can use the loan to add another store, offer a delivery service using electric scooters.
A loan will help you cover all the expenses that you need to expand, such as advertising, property, renovations, hiring, and more. This way, you don’t worry about hurting your operational costs.
Bring your business back on track
Regardless of your reason to take out a loan, if you see that it will improve your bottom line, then don’t hesitate to take it. Otherwise, rethink your decision, and see what other strategies can work for your business.
However, a loan ensures that you get the right support that you need to bring your business back on track. As long as you find a loan that suits your needs and that you can pay back, receiving a loan will provide recovery and growth opportunities for your business.
To help Australian businesses recover post-COVID-19, Capify, a national leader in alternative SME finance, launched the COVID Flexible Loan to help small businesses recover from the economic effects of the pandemic. The program is an adaptable, short-term solution that allows SMEs to repay their loan based on a percentage of their sales. This way, business owners don’t have to worry about debt repayments and can focus on growing their business.