Let’s face it. Most business owners look at obtaining a business loan as a necessary evil. They do it because it’s necessary but no one likes to borrow money and incur a debt if they don’t have to.
The most common use of funds from the proceeds of a loan are usually allocated toward cash-flow for a business. And although staying ahead of accounts receivables and paying your bills is a necessary part of running a successful business, it’s more about survival and maintenance rather than growth or creating more revenue.
Here are 5 great ideas on how to use a small business loan to increase your profits
Marketing - Advertising - Lead generation
There is probably no other single investment you can make in your business that has the potential to increase your profitability as quickly and dramatically as more sales, jobs, clients, etc... Potential is the key word here. There are many ways to market and advertise your business to create leads and sales, but not all ways will work for your particular business model. Choosing the most effective method of market penetration is crucial to your bottom line.
The type of equipment that you have (or don’t have) can positively or adversely affect the health of your business. The obvious advantage here is automation. Anything that you can do to limit or reduce your labor costs increases your profits. But another way to capitalize on a purchase or upgrade of equipment is when the investment gives you the ability to expand your products or services, which will create additional streams of revenue for your business. Purchasing used equipment is usually a good option to save money as well.
There are many ways to expand your business. But if you’re a retail brick and mortar business such as a restaurant, then expanding your seating capacity or parking area might be a wise investment. Any type of business that carries inventory could increase their product selection. Expand the number of vehicles you have to service more customers or jobs. You could also expand your products and services to cross- or up-sell to your marketplace.
While this area of improvement may not seem like it could increase your revenue, it most certainly can. Let’s say that you’re a contractor, and you have a truck down that prevents you from being able to send a crew out to do a job. Will that negatively affect your profits? If you own a restaurant and your oven isn’t cooking evenly or at the right temperature, how will that affect the quality of your food? And ultimately guest satisfaction. Repairs are essential to continue the growth and reputation of your business.
Inventory and liquidation
Regardless of whether you’re a retailer, an ecommerce business, or any other type of business that carries inventory, maintaining adequate inventory levels is crucial to retaining and gaining market share. Additionally, there are times that excellent buying opportunities present themselves (from a vendor or liquidation of a competitor) and without the working capital necessary to make those purchases, you lose that opportunity to make an increased profit margin on those products.