You have been offered a small business loan and you are wondering how best to utilize it. The loan is meant to make your business achieve goals, make important adjustments, and grow. Your mind is probably full of all the things this money can do, but you need to have a foolproof plan before you act. Here are 5 ways to get the most out of your small business loan.
1. Open a Separate Bank Account
Don’t bank your small business loan in your normal operations account. Banking it in the operations account gives the erroneous impression there is money to do anything you want. A separate account that you withdraw from only when money is needed for the designated purpose is the answer.
2. Make Automatic Payments
You do not want to be late in paying back your small business loan. Timely payments improve your credit score and make it easy for you to borrow in future. Set up a standing order for regular payments so that funds are transferred from your account directly to your lender on the due date.
3. Fiscal Discipline
A small business loan need not make you stop cost-cutting measures and sticking to your budget. The large bank-account balance should not go to your head. It is in your best interests to continue cutting costs while doing everything legal and acceptable to maximize your profits. Continue to make provision for emergencies so they do not eat into your loan funds. Visit Thinking Capital for more information and resources.
4. Avoid Common Money Mistakes
Resist being enticed by small expenditures; spending just because you can. $50 may seem too small an expenditure to make you worry, but the small amounts add up and eventually eat into your small business loan, leaving you short of funds, again. If you take care of the small amounts, you won’t have to worry about large ones.
5. Put in Place Checks and Balances
Although the money belongs to you, provide for a good control system. Let someone else look at any money requisition to ascertain the agreed purpose is served. This could be your accountant or financial controller. You will find this accountability very useful in meeting your intended growth.
6. Keep Track of Your Spending
Many businesspersons do not track their expenses. Unless you pay attention to this, you will not be in business for long. Keep a record of how you are spending the loan. This way, it is possible to evaluate the impact of the funds at any time. As a business owner, you should have a designated day to check invoices and cash-flow projections.
7. Keep Your Lender Informed
There are times you may find yourself struggling to make the monthly loan repayments. Do not hide from your debt. Let your lender know beforehand you are likely to get late in payment. If necessary, ask for their help in rescheduling the payments. In business, honesty is a virtue like no other.
A small business loan can help you build your small business into a big business. You do not have to end up like many who spend their funds carelessly and ultimately lose it all.