More than a quarter of all business borrowing in the UK is for the purpose of company growth; but simply accessing business financing does not in itself guarantee quick growth or success. You have to know how to use your business loan to most efficiently scale. There are ten key areas to focus on:
Technology & Equipment
Without the right equipment and technology, your company cannot deliver its services to clients and customers in a timely and effective way. And if you’re expanding, it’s a given that you’ll need additional capacity to meet higher demand. This may involve new purchases, or upgrades and repairs to existing items, but in either case this is a smart use of loan funds. Investment in technology and equipment allows your business to improve efficiency and benefit from their use right away, while paying for them over time (and hopefully from the additional revenue they help to generate).
Staff
The same is true for staff; recruiting new employees and training and retaining talent is a necessity if you’re expanding operations. But this can be expensive, and using loan funds to cover the costs allows you to focus on building the right team upfront; they can then help to support the company’s growth more quickly.
Working Capital
Every business needs working capital, but finding the extra funds needed for utilities, property costs, wages, inventory and everything else that comes with scaling up a business can be difficult, especially in the early stages of expansion before income has increased. Loan funds can be used to cover these day-to-day costs and keep your business operational at its new size, while changes are being implemented.
Cash Flow Management & Credit
One of the significant benefits of having the appropriate amount of working capital through a transitional period is the ability to manage cash flow advantageously. This means being able to anticipate and cover upcoming expenses, according to the timeline that best works for your business’s needs, not according to your immediate revenue. It also means ensuring that all bills and expenses are paid for on time, which helps protect and build your business’s credit score. Making business loan repayments on time also builds business credit. A strong business credit score can then help your business access financial products at beneficial rates in the future.
Inventory
Buying in bulk can be expensive, but meeting the increased demand on inventory that inevitably comes with expansion is crucial. By using loan funds to stock up you can expand operations while avoiding a big hit to your regular cash flow. Similarly, loan funds can be used to widen your product line, and even experiment with possible new products, without undue concern for the immediate revenue-generation ability of these products. This aspect of a business’s growth can take months or even years to implement without the external assistance of business financing.
Physical Premises
Most growing businesses need more physical space, which means opening new locations or expanding/renovating existing ones. But this isn’t cheap; it involves significant capital, which must be spent before any positive effect can be felt on revenue. Using loan funds to cover property costs is a smart way to invest in the long-term revenue-generation of your business, and allows you to begin scaling your business sooner than you otherwise would be able to.
Marketing
Having better technology, the right staff and a new location may cover the physical needs of expansion, but without a broader customer base, you will not be able to generate enough business to sustain your new size. That’s why marketing is such an important component of scaling a business, and why using loan funds to invest in a marketing campaign is so necessary: you need to be able to adopt digital marketing, public relations, advertising, and any other marketing tactic necessary to increase brand awareness and grow your market share quickly, in line with your capacity.
Research & Development
Research and development is not confined to tech start-ups and healthcare companies; all businesses, in all sectors, can benefit from investing in this area, to develop new products and services, improve existing ones, or simply to understand customer base and market trends in order to stay in line with them, rather than playing catch-up.
Innovation
Customers flock to businesses with the best, most competitive services, and you need to be prepared to innovate to stay relevant. Having the capital on hand to nimbly react to market changes and time-sensitive opportunities, as well as to stay abreast of market trends, will ensure you retain customers and win new ones faster than your competitors. And these customers are vital to sustain business growth.
Partnerships
Expansion doesn’t always mean opening a new location or scaling up your product line; it sometimes means partnering with other businesses, acquiring another business, or merging with another business. These are all fast ways to scale, but all require significant capital upfront. They also require your business to be in a healthy financial position – otherwise you won’t be able to attract beneficial partners (or even investors). A business loan can provide you with the stability and capital needed to attract and execute such a partnership.
To find out how your business can access convenient business financing, talk to Swiftfund. And check out our blog for more information on all of the different types of funding available in the UK.