Is the economy on a down trend? Are millennials ruining the market? Is digital taking over, are we equipped? Are we in a recession? Should we expand? All of these “WHAT IFs” plague the mind of a business owner today. However, some of the biggest and strongest brands in history were created under these circumstances. Microsoft, Apple, Revlon, Fed Ex, Hyatt Hotels. How did they do it with the challenges they were facing…
Answer, with big ideas and financial backing.
We hear stories such as the meteoric rise of Kate Morris owner and CEO of Adore beauty who at the young age of 21 started Australia’s first e-commerce beauty site on $12,000 borrowed from her boyfriend’s father because banks wouldn’t give her a chance. Adorebeauty now has a turnover of $25 million a year. Stories like Kate’s are few and far between and although banks are still reluctant to lend to small business owners thankfully there is a growing number of reputable small business lenders willing to partner with you to help you achieve your potential.
HOW TO BORROW FOR YOUR BUSINESS
Inventory – Do you have an opportunity to order inventory at a prepaid or bulk quantity discount? Has an opportunity arisen for a new retailer to purchase your stock but you have a lag period between your supply and payment from your customer? Are you selling in a new line to new independent customers who require a line of credit? These and many more are repetitive pain points for small businesses particularly dealing with bigger businesses. Having the extra funds to supply the correct inventory at times of growth allows you to strike while the iron is hot.
Expanding operations – The opportunity to rent or buy new property to aid in your expansion. This could be warehousing, new office space or a salon with better rent in a new catchment area.
Hiring of talent is crucial in expansion and quite often is at a large expense
to a business but has negative ramifications initially on cashflow. Getting the right people with strengths in sales, marketing, financials or whatever you’re lacking will be critical in scaling your business against opportunities.
Purchasing new equipment – This could be technology, displays, manufacturing equipment right down to a coffee machine for the staff room. Are you thinking of providing your retailers with advertising or stand installations but concerned on the massive outlay to do so?
Daily operational requirements – Many businesses simply take out small business loans to increase cashflow and working capital. Having an office, staff, expenses can be a drain on a business cyclically and reduce your ability to take advantage of opportunities such as PR events, conferences, sponsorships, advertising spend all of which, if missed opportunities by yourself but not your competitors, could cripple your growth. Having access to these funds to prop you up can help you get off the ground and really help you grow.
Advertising strategy – We all know we need advertising. Whether we believe we require print, social, ambassador, radio or a well structured strategic mix of all. Other than the need for it the other obvious fact is that advertising can be expensive. Heard of exposure effect or brand recall? Frequency breeds familiarity and familiarity breeds trust. Consumers, in particular Millennials and Gen X purchase on trust. Having the ability to leverage lending for marketing means you can lock in for example a 12 month plan which not only gives you a bargaining tool with your advertising agent but consistent re-engagement with your consumer on their funnel to purchase. In usual circumstances an outlay like this would be impossible but utilising finance means you get the benefit of locking in a 12 month strategy whilst making 12 monthly repayments easing pressure on cashflow and getting accurate data on ROI against your investment.
In a report from Myob.com analysis of loans made by alternative lender ON DECK found 29% of applicants were applying for working capitol reasons.
The 3 main reasons businesses took out loans were opportunity NOT crisis:
- Inventory 22%
- Expansion 16%
- Equipment 15%
Some other benefits to borrowing
for your business include if you are planning larger scale financing in the future. This creates an opportunity now to build your business credit history with a smaller loan with regular on time payments. This will provide a good credit foundation for larger opportunities in the future.
The return on investment if measured should generate more revenue than the cost of the interest on the loan.
Another potentail benefit of getting a business loan in uncertain times is if the loan is to the corporate entity the loan may not usually have to be paid if the business fails. In the event of failure the business is liquidated and may go bankrupt but not the owner personally. Why lose your house for your business?!
How do you decipher good lending from bad within your business? Always speak with finance professionals, your accountant or business strategy specialists and compare interest rates and finance company credentials. If you’d like some assistance give us a call for an obligation free discussion.
THE TIME IS NOW, THE NEW ERA IN CONSUMER SPENDING IS HERE AND WE CAN HELP YOU MAXIMIZE YOUR OPPORTUNITY
We make the focus YOU – Our friendly team of business professionals want to see you achieve your potential. Enlist our help to remove stresses from your business to give you the room to grow. We offer free, no obligation consultations to new businesses.
Give us a call today Leigh Otten – 0402 614 436
lotten@changementconsulting.com.au www.changementconsulting.com.au