Business loans have a significant influence on the growth and development of small businesses. Most businesses secure loans to facilitate speedy growth and expansion, such as fulfilling marketing plans, buying equipment, making provision for steady cash flow, etc.
A business loan is usually incurred by a business owner and issued by a lender, typically a financial institution, within agreed repayment terms and conditions. A loan could make or mar your business, especially with rising inflation and economic pressures from external factors, e.g. war in Ukraine and insecurity in Nigeria. It is disheartening to see resources go down the drain after going through the process of securing a business loan.
“Your business loan application has just been approved” is always exciting news for business owners. But, the crucial question is, “What is the next line of action to take once you receive a loan?”
Maximising your business loan involves utilising the available resources to gain as much as possible. To maximise the effectiveness and efficiency of your business loan, it is essential to map out how to utilise the funds judiciously. You can begin by asking questions such as:
- What are you spending on? : Every business usually has many needs to satisfy, but a loan might not be able to clear all. Making a list of your business needs is a good way to start.
- How do you allocate funds properly? : The question of which business needs should be met first, whether inventory, marketing or working capital. Do you have investment plans for your business? Using a scale of preference could aid in making a concrete decision.
- How much are you willing to spend?
- What do you intend to achieve your business goal with the loan?
- How do you pay back the loan without stress?
These questions are guidelines to avoid the mismanagement of loans incurred.
Here are effective ways to maximise your business loan:
Don’t spend all at once: A sudden cash inflow can get you excited to spend impulsively. Being disciplined and sticking to a budget is a key safeguard against shelf spending unnecessarily. Ensure what you are spending on aligns with your business plans and goals. Remember, the money was sought to elevate your business.
Operate a separate account for your loan: A loan is incurred to either grow or start a business. Separating your loan account from the regular business account would help track properly and avoid any mix-up with other funds.
Develop a payment plan: In as much as a business loan is an instrument of business growth, it comes with great risk and the more reason to plan a repayment schedule while executing your business strategies.
Have a good relationship with your lender: Loans are easily accessible these days, and the best way to compensate a lender is to be creditworthy. Being a credit-worthy business owner can boost your business credit score, i.e. making payments according to the scheduled payment plan and effective communication if payments would be delayed or stalled. A healthy engagement with your lender is a great way to build a trustworthy relationship. This can increase your chances of future business loan approval.
At Biznurture Financial Services, we have disbursed over ₦1 billion worth of loans to help fulfil various business dreams. We are committed to rendering loan services to Lagos and Port Harcourt businesses. Contact us for more enquiries and benefits.