From idea, to validation, to expanding or pivoting, funding is a major success factor for any business. A successful company lacking funding at the crucial time of their growth can go out of business and a not so great company with funding might have enough time to pivot to something more viable.
As an entrepreneur, you need to learn about your options for external funding into your business and how to choose the right funding model that supports your business in both short and long term.
A business loan is a key source of external funding that every business owner should learn about even if they currently don’t need it. One of the biggest misconceptions we have heard while working with shecluded is the view that only distress companies sort for loans. No! Some big organisation take loans to implement projects even when they can afford it and for them, it is a business decision based on the estimated ROI (return on investment). They simply gauge the cost of different options and the expected returns then take the best decision for the business.
There are good/healthy reasons that businesses get a loan and we have put together five of them. Watch out for them in your business.
In 2019, expansion is not a fancy word for aggressive entrepreneurs who are too ambitious! If you want to keep making a good profit to manage inflation and don’t want your business to shut down completely, whatever the size of your business, you should think, plan and act expansion every day. A loan can provide you the funds to implement your expansion plan.
Most businesswomen in Nigeria play in the retail space and from working with them, we have learned various inventory needs and how they impact not only on their bottom line but on their business brand. There is a constant need to make sure inventory is available for the customer immediately they need it. For some other businesses, trying out new inventories to attract a new set of clienteles or improving theirs is key to their survival. Additionally, some business see strong seasonality in but without additional funds they find themselves struggling to respond. Effectively planning your inventory needs with a loan can make position you to seize all the opportunity available.
Some good businesses have died because they were unable to manage their cash flow to keep the business operating during a moment of temporary cash deficiency. Getting a loan can give you that lifeline to keep operating while you’re trying to get new customers.
4. New equipment:
Constant innovation is disrupting the way we do everything including our businesses. Sometimes, the best plan to take your business or idea to the next level is a piece of new equipment and whether you can afford to pay cash for it or not. Financing it with a loan might be the best strategy to optimize the new equipment. Buying a new equipment with your funds and not having funds to run it creates an underproduction problem.
5. Increases your term on larger loans:
Small businesses have limited access to loans because of their lack of credit history, no one knows how you will behave as a borrower. When you take a loan for your business and repay, you find out that having that sort of discussion with your financial institution gets easier. We discovered that within our network, it’s easier to discuss larger loan amounts with women that have borrowed before and have paid back.