Have you just received a note or a text message that the bank or finance company has approved your small business loan? You must congratulate yourself. Many people that applied for such a loan were not as lucky as you are to get approval.
With the loan that you got, you do not have the cash you need to reach your business goals. You now have the financial capability to make drastic changes that can bring in more revenue for your business. Perhaps, you can now buy the latest machine that you are sure to triple production or open a new branch in a strategic location. Whatever you wish to do is made possible by the new financing that you got.
If you want to make the most of your loan, put your money where you planned to place it as you state in the business proposal you have attached to your loan application.
However, the thought of having so much cash sitting in your bank account soon can give you a feeling of giddiness. Lots of thoughts are running in your head of the possible ways that your newly acquired capital can make your business grow. Here are some ways in which you can put into proper and profitable use your business loan and not spend it over trivial things.
Deposit the Money in a Separate Account
If you intend to use the money from your loan to expand and grow your business, depositing it in a different account rather than in your existing checking account will prevent you from spending part of it on unnecessary purchases.
Since transferring money from one account to another can be a hassle, you would end up spending the money in your checking account, which is convenient for you while keeping the money in your other account untouched. Make sure to transfer funds to your checking account for necessary purchases and expenditures.
Make Automatic Loan Payments
Make sure that you pay your loan promptly and you can only do this by setting up an automatic loan payment from the money that you deposited in your separate account. Most banks and lending companies have automatic repayment feature. Schedule the automatic debit one to two days before your due date.
Records would show that you have always been prompt in your loan repayment. The bank would be happy to lend you money again. Besides, you would have a good credit score, which you must enhance so that you can quickly get approval if you apply for another loan. Automatic repayments would also save you from the inconvenience of having to drive to the bank to personally make a payment.
When you set up an automatic debit payment, you have less to worry about regarding your loan, as long as there is money in your bank account. Some banks offer better terms such as lower interest rates and easy repayment schemes for borrowers that pay through an automated debit system.
Plan Your Budget and Cut Costs
A considerable amount of money in your bank account is not enough reason to be confident about the growth of your business. Continue planning a sound budget and reduce costs as much as possible. You must always plan for the future. Remember that careless spending can deplete your financial resources. You do not know when emergencies would happen, but if you have some savings, you could easily face these problems.
Having enough funds to finance your business does not mean that you are now on your way up. Prepare for challenges and opportunities in the future. Manage your loans well and refinance if possible to reduce the cost of your loan. Finding the least costly way of running your business will help you maintain cash flow.
Check Your Finances Regularly
Allocate a day in a week to sit down and check the income and invoices. If you have a product that does not sell well, you can stop restocking until everything has been sold out while increasing the inventory of items that are in demand. Foresight is important for the success of your business.
Do Not Hide From Debts
If your business is experiencing difficulties and you cannot meet your financial obligations, visit the bank or the financial institution where you got the loan and discuss your situation. Do not wait for the lenders to send you a demand letter or take you to court because this can cost you more in terms of finances and reputation. Your honesty would pay off because some lenders would offer you easy payment terms until your business is stable again. Most importantly, you would be able to apply for another loan when the need arises.
A small business loan can help you grow your business and achieve your business goals. But, if you do not know how to make the most of the opportunity, you might find yourself in a worse situation than before you had the loan.