Refining a business that you have meticulously bootstrapped can be risky without a start-up business loan in your grasp. If the persona of a budding, ‘hungry’ SME business owner who’s aiming to build or expand their business empire fits you to a T, read on as we reveal 5 reasons how a small business loan can improve your future business ventures:
Sure, you may be thinking that there is no real reason for you to get a loan and that your current funds are sufficient for your establishment to stay afloat. Having said that, having a steady cash flow will greatly assist you on days when you are stuck with dead stock in your inventory that you are unable to dispose of or when your customers don’t pay you on time.
Play it safe by getting an SME loan so that in the instance that your cash flow is tight and there’s little room for adjustments in your expenditure, there’s something for you to fall back on during the tougher, dry period.
Restocking and replenishing your inventory with relevant, marketable products is not rocket science but there will be times that you would not be able to cater to the demands of your customer. If your current trade depends strongly on seasonality and what the market audience wants, then this will definitely be a setback to your business model.
On the other hand, SME loans can cushion you in the occasion that your sales aren’t doing too well and you would need to invest money in your business to recuperate what your business could not achieve in the previous months.
Read Also : SME Businesses: What Are They Anyway?
Right now, it goes without saying we all need proper equipment to generate a pre-determined amount of output which will, in turn, generate revenue for your business. Repairing or replacing existing equipment or machinery will take a huge chunk of your funding and this will then lead to a decrease in your earnings as it is used to offset these unnecessary costs.
And if your current equipment is working just fine, perhaps you may want to upgrade your current setup in order to boost your business productivity. And of course, all that is made possible with the right business loan.
You may have dismissed this and felt that this is not relevant to you feel on the pretext that you are already using various financial products and services from a particular bank and they would already have a history of your current cash flow. The reality check is, this does not count towards your credit history and you may face difficulty in securing a larger loan as banks would need to check your credit report first to determine if you are a reliable paymaster prior to approving your loan application.
Getting a small business loan that is easy to repay will help you to solidify your reputation while improving your creditworthiness, so yes, as they always say, take baby steps before moving towards bigger goals.
It is every business owner’s dream to expand their brand further, as, after all, there are many other entrepreneur-minded individuals who are most likely doing the same thing as you are now, some with better or lesser resources in hand. We have witnessed how some brands thrive when they first enter the playing field for SME businesses only for it to fail when the investors pull out due to various situations such as discouraging economic factors or technological disruption.
The nature of SME business is that if you stay dormant and complacent with your current achievements, there is always the likeliness of someone catching up to your progress and diminishing your existing market share via their marketing strategies and branding efforts. Hence, it is wise albeit a prudent decision to stay ahead of the competition by investing in a business expansion so that you will receive the competitive advantage to gain and maintain leadership in the marketplace.
How does a Small Business Loan compare to a Personal Loan?
The general impression surrounding business loans is that it is difficult to access as opposed to personal loans which are easier to apply for due to their nature as an unsecured loan and the stipulated required documents such as personal identification documents, your current salary payslip or income tax filing reports as well as your EPF contribution statement.
Still, there are a few key features that distinguish an SME loan from a personal loan such as lower interest rates, government support and advice for specific industries and most importantly, it frees up your cash flow and allows you to focus on what matter’s most for the growth of your business. Having said that, both loans function the same way as most loans do; you will get penalised for defaulting on a payment and failing to pay back these loans will definitely cause a dent in your credit report.
We hope that you have found this article on business loans useful. Let us know in the comment section below.