There is a natural fear around taking on business debt, however loans, while complex to understand, can also open up substantial opportunities for growth. “Business loans may be intimidating but they should really be seen as strategic investments,” says Craig White, COO and Co-Founder of Geddes Capital, a specialist in secured business lending.
Here are five reasons why debt can make all the difference to moving a business forward.
1. Secure stock
Securing a loan can enable a business owner, to purchase more stock or raw materials. It also may allow for negotiating bulk discounts on stock, improving profit margins.
2. Increase tech and equipment
Investing in modern technology and equipment enhances efficiency and productivity. For example, a manufacturing business could use a loan to purchase advanced machinery, leading to faster production times and lower labour costs.
3. Boost your brand
A loan can be used to fund a marketing and advertising campaign to attract new customers and retain existing ones. An e-commerce store, for instance, could use funds to launch a targeted online marketing campaign.
4. Increase working capital
A loan can supply any business with the essential capital required to expand its customer base, while maintaining sufficient funds to purchase inventory, settle payments with creditors, and effectively manage and expand accounts receivable.
5. Ramp up research
For businesses in industries where innovation is key, a loan can fund research and development activities. This could involve creating new products or improving existing ones, leading to future profits.
“These are just five great reasons to push for business growth this year,” says White. “Funding opens up many opportunities.”
Business owners will need to grapple with the types of interest rates, such as fixed or variable, how the rates accrue, and the impact on the total amount repayable. “This complexity increases with loans that have fluctuating repayment amounts or structures, such as balloon payments or adjustable rates,” White adds. “But this is why professional support makes all the difference.”
It is difficult to predict future performance and therefore wonder about affording debt repayments. But working with a reputable lender means a business won’t become overstretched. “At Geddes we take a future-forward approach and work with clients to advise on the most appropriate type of funding. Good lenders won’t allow you to overcommit and will ensure that the facility you get is suitable for your needs.”
Life does happen and so the risks of defaulting on loans must also be considered. Tailored plans and loan structures have a crucial role to play but the reality is, strong lenders understand that unexpected surprises can arise. “This is why it’s so important to have an open line of communication and to always be honest if you are concerned about defaulting. By letting your lender know the challenges ahead, there can be options to reduce rates, put a payment holiday in place or even extend loan facilities to manage cashflow. But you have to communicate as early as possible.”
Honesty and trust between a funder and a business owner works two-fold; it not only cements the confidence that the funder will provide support and resources as promised but also the expectation that the business owner will utilise funding responsibly.
When processing a business loan application, a quick decision is much easier to achieve when a business’ paperwork is up to date such as having accurate financial statements and tax records. “This indicates to funders that a business is on top of things.”
“Our leadership team has significant entrepreneurial experience, so it’s key for us to ensure every client relationship is approached with reliable insight on funding needs and opportunities for growth,” White concludes.