When anyone decides to start a company or a new business, it is not necessary that they have the money to make this idea become a reality. Not all of us have millions stashed in the back end – if you think about it not many of us have a hundred thousand dollars just lying around for those business epiphany moments. One thing of interest is while most people are familiar with the term ‘loan’ not many of them actually understand that there is such a thing as a business loan – which has certain variables different from a simple personal loan. Not only limited to banks, business loans can be gotten from business owners, personal wealth managers, financial funds, governing bodies and of course the ministry itself. Business loans are a great way to grow your business when you see that the financial route is the only one left available to you and you don’t have the cash funds necessary to inject a large amount of money in.
There are plenty of advantages of using a business loan to expand the corporate strategy. While it can be used to start a company in the first place, it can also be used for existing business owners to play around with. The list of topics are endless – one of the more common use of a business loan is to set up a satellite office somewhere else when business seems to be expanding and profits are limited by space constraints. Another use for a loan is to beef up a marketing plan, hire a PR agency to assist in branding strategies or simply to use the power of television and various types of above the line collaterals to increase market penetration, A business loan is often a calculated risk, one that involves a lot of thinking and only undertaken when the potential for profit or increased consumer awareness is there. For example, I know of a small company in Australia that hired a large PR and Events firm to sort out an event that would spotlight their new range of dune buggies. While the event cost them a hefty $200, 000 – which they had to take in a bank loan for, the PR did a fantastic job of the event and raked in more than 2 million dollars of publicity -measureable by ads, press coverage and polls. This immense advertising dollar generation then led to more than $40 million dollars of net revenue for them in the same year. This I what I meant by taking a calculated risk – the potential for profits are definitely there, it was all down to execution.
The only thing about the loan is that it usually comes with an interest attached to it and this can be a killer. With interest as high as 15% in some states, you have to be careful in the amount you borrow, follow a repayment plan you must stick to and most of all, make sure that the investment nets in at least 10 times of the initial loan amount.