10 Ways to Increase Your Revenue With a Business Loan
How to use a small-business loan
A small-business loan is versatile. It can help you smooth cash flow, finance renovations or access capital for expansion.
“Like most financial tools, it can be wonderful if used appropriately,” says Brian Eder, CFP, managing partner and private wealth adviser at OnePoint BFG Wealth Partners.
There are many ways a business loan can grow your revenue. Eder explains that it’s about doing the math for your company.
“If you can borrow at one cost and grow at a clip that exceeds that cost, those are great opportunities to use debt to grow,” he says. “You can run a calculus on the required return on investment and use debt intelligently.”
1. Consolidate high-interest debt
High-interest debt can strain your business’s budget. Consolidating your existing debts into a lower-interest loan might not increase revenue directly, but it can free up funds for other expenses.
A debt consolidation loan streamlines multiple payments into one and might reduce your rate. Approach consolidation carefully and consider the borrowing cost. A new loan with a longer term could increase total interest.
2. Invest in better equipment
New equipment might be expensive, but a business loan can finance the purchase. Investing in more effective tools might increase production and revenue in tandem.
Prioritize equipment that increases your capacity instead of upgrading for modernization’s sake.
“New equipment might have a longer useful life and some efficiencies, but, ultimately, if it’s a good use of debt, it should increase your capacity to some degree,” Eder says.
3. Buy inventory in bulk
Buying inventory in bulk is typically less expensive, but it requires more upfront capital. A business loan can provide the funds you need. Affordable inventory and reduced shipping rates can increase your profit margin directly. Remember to factor in interest and other borrowing costs to ensure a net gain.
4. Expand into new markets or locations
Expansion is an exciting prospect with revenue growth potential. Business loans can cover associated expenses, such as buying inventory or equipment, hiring staff or acquiring real estate.
Plan carefully to mitigate risk.
“The biggest thing when you’re considering expansion is not just following your gut but also having the discipline to look at various outcomes,” Eder warns. “People get captivated by the positives in a transaction, but if you’re taking on debt to grow in a new market, you need to understand what poor economic conditions or average or poor sales numbers do to that calculus.”
