If your business growth has plateaued or you’ve hit a wall with your business plan, it may be time for you to change things up, particularly following a year of massive changes in consumer spending and customer preferences because of the Covid-19 pandemic.
But big plans cost big money, so you will need a good dose of working capital to get you over the hump. What are the signs that your business needs to apply for a loan or cash advance?
A loan or a cash advance should be a carefully considered decision – one that ensures your business creates profits to pay off the loan, instead of putting your business in the red.
Below are six signs that will help determine when or whether a cash advance is right for your business.
1. You don’t have enough space
If your business is literally running out of space, it may be time to apply for working capital to make some. You may have run out of space because your team has grown or you need more stock to keep up with sales. A renovation or revamp is a great way to use a cash advance, because it improves your operational layout, keeps you on the cutting edge and improves customer experience – ultimately increasing your turnover.
2. You have a good credit score
When you apply for any type of loan, the first thing the lender will do is check your credit score. If your credit score is good, you are ahead of the game, and this is the best time to apply for a loan. A good credit score will ensure a lower interest rate, a longer-term loan, and will garner a good relationship between you and the lender.
3. You can’t keep up with your customers’ demands
If there is high demand for your product or service, but you aren’t able to keep up with it (for example, because of low inventory or lack of support staff), it may be time to seek working capital to build up this part of your business. The cost of finding a new customer far outweighs what it costs to keep one. So if customers want to buy from you, it’s important to lock in that sale with great customer service and good turn-around times. If need be, invest in these areas of your business to safeguard your customer relationships.
4. Your operations are not efficient
If you want your team to be on top of their game, they need to have good tools and efficient systems at their disposal. Using a cash advance to upgrade your equipment, office or technology systems, for example, can be an excellent way to streamline your operations and empower your team to work harder and smarter. This will improve morale, revamp company performance, increase sales and quickly off-set the costs of your original loan.
5. Your visibility is not optimal
Staying upfront and relevant to customers costs money. Of course, it is essential to figure out where you want to appear, what the costs will be, and what kind of return you can expect from this marketing activity. Marketing takes many forms, from social media and Adwords to print, but can also be invested in peripherally with a direct sales team. You really need to think about your business specifically in order to understand how to best connect potential customers with your product.
6. You meet the qualifications
Before you apply for growth capital, it is vital to understand whether you meet the application criteria.
The bottom line
It’s important to notice the signs that your business is ready to shift in order to grow. Then you need to take the necessary steps to acquire a loan or cash advance to make that happen. Working capital is like air for business; it helps you breath during challenging periods and can be life-giving when it comes to taking advantage of opportunities. So create a considered plan for how you would like to address your current business challenges. And always remember to use working capital for growth-enhancing activities, rather than plugging holes.
Dov Girnun is the chief executive of Merchant Capital.
*The views expressed here are not necessarily those of IOL or of title sites.
BUSINESS REPORT