A company’s success is comprised of a number of key variables, but there are those that are even more relevant to keeping the business going in the right direction. Financial resources , undoubtedly, occupy this prominent position, since every company depends on capital to produce and grow.
Interesting alternative for the business owner
Raising resources is not always simple, especially when it comes to small and medium-sized businesses , where budgets tend to be tighter and revenue is low. But, there is always a way out for anyone who wants to see their business grow, and when it comes to the financial side, lines of credit can be an interesting alternative for the business owner.
For example, the loan to the company can raise the capital needed to support the costs in a given period or help in investments that will bring returns to the venture.
What are the most common types of loans?
The business credit market is quite vast, presenting different alternatives for the entrepreneur to depend on their need. Loans for example, have distinct modalities and characteristics that are worth knowing.
Despite unusual foreign nomenclature, this type of loan is quite simple to understand. But to make it even easier to understand, imagine the following situation: Your business gets a big order from a customer, but it does not have enough capital to afford the production costs . Since payment will only occur in the future, you have to raise funds to get started – that’s where factoring comes in!
In this modality, the financial institution enters with the necessary capital in exchange for a part of the credit rights related to the sale of the production. Thus, when you receive from that customer, a portion of the profit goes to that corporation.
This is the most common and well-known mode in the business market . In it, the entrepreneur goes to the financial institution of his preference and requests the desired amount.
The implementation of this type of negotiation is conditioned to a rigorous and bureaucratic credit analysis. In addition, there may be a need to offer some collateral to pay off the debt, such as movable or immovable property.
It is worth mentioning that, in conventional loans, interest rates are usually quite high, which makes this a modality not very indicated.
This is a more recent type of loan , the use of which has grown considerably in recent years, especially because of the ease it presents.
Crowdfunding works as follows: the entrepreneur registers on a specific platform for this purpose and informs the amount desired, as well as the destination of this money. On the other hand, investors evaluate the advantages and invest their money in exchange for some type of financial return from the company that requests it.
This is undoubtedly one of the most advantageous modalities for the entrepreneur. Due to the legal regime of cooperatives and government incentives offered to this type of association, interest rates are significantly lower and access to credit is much greater.
How to invest well the amount raised with a loan?
Now that you know a little more about the different types of loans , it’s time to better understand which points of your company can benefit from hiring one. So, check out how you can invest the values you’ve acquired:
Working capital is one of the main concerns of the entrepreneur, because without it it is unfeasible to keep the operation of the company in the short and medium term and bear the debts. This is because even though sales are not enough to make up the company’s cash, there are costs that can not be expected, such as employee salaries, energy, rent, etc. It is therefore essential to have working capital to cover such expenses.
In addition, there is also the situation of forward sales, where the trader does not immediately receive the amount, but still needs to replenish the stock and pay the quoted accounts until the amounts are received.
In this context, the loan can be an effective solution to have the necessary working capital to guarantee the operation of the company for longer and avoid delays with accounts, suppliers etc.
Marketing and Publicity
Marketing is, today, one of the pillars for the growth of a company. So much so that many businesses already dedicate a portion of the budget exclusively to the actions of this sector.
Knowing this, you can also use the loan to improve the disclosure of your company. After all, with resources it becomes easier to hire specialized marketing agencies and, thus, to boost the return of the shares.
Another quite important point that may be the focus of investing with the money of a loan is the modernization of the company . In this case, the advantages are clear, as the business can significantly improve the quality of the products offered, increase its operational efficiency, for example, by buying new machines and computers.
Thus, even if the loan presents some costs, such as the payment of interest, when the value is invested in the improvement and modernization of the company, certainly the benefits compensate.