Businesses need money to function. Hiring new employees, buying office supplies, paying merchants for goods, subscribing to online business tools are a few reasons why businesses need unlimited access to financial resources. Entrepreneurs, especially in Nigeria, face many challenges and most times, these challenges arise due to lack of funds required to run the business.
In today’s article, I am going to be discussing a major business tool, Loan, and why it can be beneficial to your business irregardless of the risk attached to it. There are various kinds of loans that serve different purposes for individuals and businesses. Such loans include student loans, payday loans, mortgage loans, auto loans, personal loans etc., but for the purpose of this article, I’ll be focusing on the one that concerns entrepreneurs, business loans.
Forbes defines a business loan as a type of commercial financing qualified businesses can get from traditional banks, online lenders and credit unions. Primarily, business loans are intended to provide additional funding for entrepreneurs who are overwhelmed with business expenses. It is important to note that financial institutions grant loans to businesses who they consider eligible based on some factors which include; Cash flow and income, Value of Collateral, Age of business enterprise etc.
The Benefits of a Business Loan
Business loans are a powerful financial tool that provide a plethora of benefits to all scales of businesses and although they come with a level of risk, they can be very instrumental to the lifespan of a business. The benefits of a business loan include;
- Business loans can be used for expansion — If you are considering opening another retail outlet or adding a new product to your existing range of products, a loan can be a great way to finance these upgrades. Expanding your business plays a crucial role in growth and increasing your customer base which leads to a boost in your profit. With a business loan, digging into your operational funds or business profit is evitable because the loan covers the expenses for expansion. So, you can manage your existing business and expand to another location without financial stress.
- Business loans can be used to purchase machinery- For a business to operate smoothly and provide maximum satisfaction for its customers, it needs machinery to create products or tools to render services. A business loan always comes in handy for business owners who, due to inadequate funds, struggle with buying new tools or paying for regular routine maintenance for existing machinery needed to create products or render services to customers. If your business is not in a great spot financially and you need to purchase new equipment or conduct routine maintenance for your current equipment, you should consider applying for a loan from a credible institution that offers convenient repayment terms.
- Business loans can be used to pay for new hires — Hiring new employees is inevitable, especially if your business is experiencing rapid growth. New hires can be beneficial to your business because they bring fresh and innovative ideas that aid business growth. Many entrepreneurs grapple with too many things on their plate and overwork their existing employees because hiring new staff is expensive. The cost of hiring new employees goes beyond salary. Other costs include benefits and compensations, training etc. A business loan is a smart way to relieve the financial burden of hiring employees or freelancers. With a business loan, entrepreneurs can sort other expenses that help new hires increase productivity.
- Business loans can be used to improve your marketing strategy — The growth of a business depends largely on its marketing efforts. A rich and effective marketing strategy will boost revenue and increase customer base. With the presence of social media platforms, businesses can create awareness for their product or service online and reach a wider audience. However, these social media channels not only help businesses advertise, they also provide digital tools that aid business growth. Although these tools are beneficial, they can be expensive to renew monthly. With a business loan, entrepreneurs can cover a variety of marketing expenses to boost their services.
- Cover operational expenses — Businesses spend money daily to provide service for their customers and operate smoothly. With a business loan, businesses can finance their everyday operations and fund short term expenses such as Rent, Payroll, buy office supplies and in some cases, emergencies that occur during working hours.
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