You may apply for unsecured business loans to fulfil your business’s growth and expansion needs. These days, many lenders offer these loans at competitive interest rates, flexible repayment terms, and easy eligibility and documentation requirements. If you have received approval for your business expansion loan, congratulations!
However, now that you have your funds at your fingertips, the next big challenge would be to decide how to put that amount to the best possible use.
The way you use your approved loan amount varies, depending on your situation, industry, and business. However, before you start using this amount, you need to think about two vital things: how you will use this loan and how you will repay it?
If you have taken a business loan for the first time, you must be confused about what to do next. The following tips will help you use your loan amount efficiently to get the most from your approved loan amount.
1. Don’t Ignore Your Long-Term Costs
Although you have enough money in your bank account right now, you still need to be watchful of your budget and try to cut unnecessary costs. The loan amount you received today might be enough to cover your current expenses.
However, a financial emergency may arrive at any time, and you must put some funds aside to create your safety net. You will secure your future by keeping a watch on your long-term costs and staying within limits.
2. Expand Your Product or Service Line
If your business is doing well, you have strong sales, and a loyal base of customers, take this as the right time to expand your product or service line. If you want to turn your business into a sustainable, long-term endeavour, it’s crucial to stay a few steps ahead of your competitors. Rather than thinking about the next year or the coming season, plan for the next 5-10 years.
Also Read: How Does Your Debt-To-Income Ratio Impact Your Business Loan Interest Rate?
Adding a new product or service to your business might help retain your old customers and also add a few new ones. In the world of business, it is crucial to stay updated with the evolving market trends and needs.
3. Pay Off Existing Debts
If you already have existing debts that you are handling at present, you can use your business loan amount to pay them off and start building working capital. Paying EMIs to several lenders is less economical than paying a single EMI to one lender. So, a better option would be to consolidate your existing debts and pay them off.
Once consolidated, paying them off will become easier for you. Besides that, you will also save a lot on the interest outgo with this process. If you are handling several loans, look at their payments and interest rates. Consider consolidating them to lower the interest rate and make them more manageable.
4. Create a Constructive Plan
Whichever industry you are involved in, it is crucial to create a constructive plan to support your growth and expansion. Identify the areas of your business that you can benefit the most from your approved loan amount. These areas may vary depending on the situation and stage of each business. Some of the common focus areas include the following:
- Equipment: Think about buying new equipment depending on your industry and the latest technology. Whether it is a new machine for your factory or a new truck for your shipping company, equipment will work as the driving force for your business growth.Without the required equipment, you won’t be able to take your business to the desired level. Upgrading your equipment will not only enhance your efficiency but will also help you attract more clients.
- Inventory: Your stock is vital for your business’s normal functioning. There are times when you would want to spend your loan amount on your inventory, especially if your business deals in retail.You may use your loan amount to replenish your inventory and purchase your stock, which can be an excellent way to try new products or manage seasonal highs or lows.
- Marketing: You may spend some amount from your approved loan towards the marketing of your business. It is a valuable expenditure that can help draw in more customers. After all, you want to attract more customers and retain loyalty from your old ones.
Therefore, investing in print ads, media ads, company events, and search engine marketing can help spread your brand message and make you a known name in the industry.
- Operational Costs: While running your business, you need to cover a wide range of costs, including workspace rent, internet, utilities, gas, salaries, and more. If not managed properly, these operational expenses can quickly go out of control. So, you may also use your loan amount to cover these expenses.
So, all these areas are great places to cover with your approved business expansion loan amount. Where you spend the money depends on your business needs and nature. The key is to make the right strategy and plan well to get the most out of your business loan.
Clix Capital offers unsecured business loans of upto ₹ 50 lakhs to meet your business growth and expansion needs. We offer competitive business loan interest rates with flexible repayment terms. Use your loan amount as per your business needs and make the most out of it using the tips mentioned above.
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