Financial help is essential to a company for its initial capital investment, the working capital and to carry out day to day expenses. Basically, for a company to conduct its business effectively there is a need of funds.
Moreover, funds are needed to start a new business venture or to expand an already existing business. But due to the lack of funds, there arises a need for small business loans to expand the business to the next level such as by adding a new product to the product portfolio, setting up an office at a new location, increasing manpower, digital marketing, etc.
Based on the business expansion plans, business loans can be customized by the financial lender. It can be a small business loan for a short-term period or a long-term business loan.
What are the ways to use the business loan for expanding business?
There are innumerable ways in which a business loan can be used for expanding the business. Few of them have been detailed as follows:
(1) Product Development:
A company’s goal is to get an extra edge over its competitors in the market and this can be achieved by developing new products to capture the market demand and tap the underlying business opportunity. By opting for a small business loan, the company can invest the funds in the development, launching and marketing of the product.
(2) Vertical integration Strategy:
As a part of business expansion plans, the company would like to get complete control over their supply chains like its distributors or suppliers or retailers. This strategy provides an added advantage to the company by allowing it to not only have complete control over its manufacturing process but also control its supply chain process.
The company can use the business loan to achieve this strategy.
(3) Horizontal Integration Strategy:
A company after reaching a certain level in the market often wants to capture a major market share. This can be achieved by either a merger or acquisition of a competitor or an equal-sized company.
The financial help required to attain this business strategy can be obtained by business loans.
(4) Investment in plant and machinery:
A business loan can be used to purchase and invest in new plants and machinery to increase the existing production capacity and fulfill the market demand by supplying more products. This would help in generating more revenues and would take the company to the next level on the value chain.
(5) Setting up an office at a new location:
A company headquartered in one place may find it difficult to cater to the market demand of another market. In such cases, a company can open an office in the new location to cater to the market demands. A small business loan can help achieve this objective of the company.
(6) Increasing the manpower:
To implement new ideas, a company needs adequate manpower. With the added manpower comes an added expense in terms of salaries, incentives, etc.
Small businesses may find it difficult to increase the manpower and for such needs, they can apply for small business loans.
(7) Upgrading the office:
A company needs to upgrade itself by renovating its office, increasing the space in its warehouse, building a better infrastructure, etc. These all can be accomplished by getting small business loans.
(8) Digital marketing:
Owing to the current modernization era, everything has been digitalized. To increase its market presence and expand its business and take it to the next level, a company needs to go digital. It’s not feasible for a company to disturb the already allocated funds from the rolling capital for digital marketing and thus they can apply for a small business loan.
To conclude, a company can use small business loans/business loans to invest in its business for expansion plans. A company can choose amongst various financial lenders and various business loan schemes available by easily using a business loan calculator to determine the equated monthly instalments (EMIs) payable. This would help them finalize the amount of business loan they need and accordingly their business loan requirements would vary.
FAQs:
(1) What are the basic business loan requirements?
Basic business loan requirements include Identify proof, Address proof, ITR, Business plan, Business registration copy, Agreement copy, Bank Statement copy, Passport-size photograph, etc.
(2) How to determine the EMI amount?
A business loan calculator is an easy way to plan the repayment mode of the business loan by calculating the monthly payable instalment i.e., EMI.
(3) Can small business loan be applied online?
Yes, many financial institutions have made an online application available for companies to easily apply for a small business loan.
(4) Is business plan mandatory to apply for a business loan?
Yes, a detailed business plan helps the financial lender understand your business needs and formulate business loan accordingly.