6 Different Uses of Business Loans: How to Get Started?

Businesses require a steady flow of funding to sustain day-to-day operations. This is particularly true for start-ups or corporations that are starting a new venture. While there are a plethora of financing options for businesses to gain funds, taking a business loan safeguards a businesses’ long term interests.

Listed below are the six different ways how business loans can enable growth and long-term prosperity. If you are considering taking a business loan, this blog also highlights recommendations towards the latter sections of this blog.

What are the uses of a business loan?

Here are six different use cases for which businesses can opt for loans from banks and financial institutions.

• Expanding your business

When you want to expand your business operations by way of opening new stores, launching new products, or other means, you need funds. In today’s competitive markets, you have to stay ahead of your competitors by grabbing the right opportunities as they come your way.

Thanks to a business loan, you don’t have to restrict your dreams due to lack of financial assistance. Using a business expansion loan, you can diversify your product lines, bring innovations to existing products, start operations in a new location, hire new employees and bring about other expansions to your business.

• Purchasing equipment and machinery

Speed and automation are the keywords in any business today. Reducing manual effort as much as possible and increasing productivity using state-of-the-art machinery can help businesses gain a strong foothold in their field.

Banks and financial institutions provide exclusive machinery loans to small businesses and entrepreneurs. You can make use of these loans to upgrade your existing machinery or invest in new sophisticated machinery to carry out your business more effectively than before.

• Managing working capital

Working capital is essential to carry out the day-to-day activities of a business. As a business owner, you need a constant flow of cash to pay the wages/salaries of your employees, take care of utility bills, and pay overhead charges. 

Working capital loans can help you in this case. Financial institutions offer short-term working capital loans at attractive rates to make them more accessible for businesses. This way, you needn’t reinvest your profits into the business to run your daily operations.

• Investing in marketing and advertising

Creating visibility and positioning your brand in your target audience’s minds are keys to your business’s success. While big businesses can afford to do this, small businesses and start-up entrepreneurs may need more funds for marketing and advertising campaigns.

This is where a business loan can help businesses seek the services of external marketing agencies or hire their own in-house marketing team to take care of the promotional activities online and offline.

• Stocking up on inventory

An organized inventory management system is the key to a business’s effectiveness. Your inventory needs to be updated and available to your customers when they order every time. 

Using a business loan, you can replenish your inventory at the right intervals, buy more inventory to cater to big orders, and invest in an effective inventory management system to automate all inventory-related tasks. This way, you can reduce manual efforts to a great extent. As a result, the chances of errors are reduced to nil, and your efficiency goes several notches higher than before.

• Research & development

Innovation and competitiveness are significant factors that define a business. What helps in this innovation? Businesses have to invest a lot in research & development to understand the pulse of their audiences and bring in the necessary innovations to their products to cater to the preferences of their customers.

Today, even the government encourages small businesses and entrepreneurs to spend more time in research & development. They do this by offering business loans exclusively for R&D projects. This way, businesses can come up with new products with innovative features and develop their overall efficiency.

What factors should businesses consider before taking a business loan

Today, there are quite a few players in the fintech industry offering secured and unsecured business loans at attractive rates to businesses of all sizes. If you are looking for a loan for your business, you should choose the right lending partner.

Here are a few factors to consider ensuring you don’t get exploited by unscrupulous lenders in the field:

• Know exactly why you need a business loan, so that you apply for the right amount and spend it for the right purpose.
• Ensure your financials (numbers on the income statement and balance sheet) are strong enough to help you get a proper, secured loan from authorised banks.
• Compare business loans from different lenders to understand the terms and interest rates offered before you choose the one that is right for you.

Conclusion

Business loans can help in the continuity and expansion of operations without further roadblocks. Thanks to the number of lenders in the market today, access to business loans has become far easier than before. However, businesses should exercise caution and analyse all the lenders well before opting for a loan. TallyCapital, available exclusively to TallyPrime customers, stands out as a prime choice for businesses seeking not just funds, but a partner in growth.