How to Spend a New Small Business Loan
While the goal is simple, the sheer number of business strategies you could employ to create value can be overwhelming.
For example, you could fund a new custom acquisition strategy, purchase new equipment, catch up on payroll, or start a new benefits program, just to name a few notable options.
To help you navigate the process, this blog post will walk through different ways you can go about spending your new business loan.
4 Lucrative Ways to Spend Your New Business Loan
1. Invest in Employee Retention and Recruiting
If you’re like many other small business owners, the pandemic made the already difficult task of retaining and attracting top talent even more difficult. However, to scale your operations, you’re going to need more hands on deck.
Even if you’re not looking to hire more employees, it’s worth exploring an investment in your existing employees to ensure that you retain top talent.
Despite vaccination campaigns gaining steam, many workers are concerned about returning to work, struggling to find child care, or other obstacles created by the pandemic. Using your loan proceeds, you could provide a boost to employee retention and recruiting by, for example, setting up a program to subsidize childcare.
While this is a long-term investment, in the case of childcare, you can be certain your employees will be more productive. Plus, they’ll be more likely to stay with your company and recommend that others work for you too.
2. Modernize Your Business
The cost of the software required to run your business has cratered compared to just 20 years ago. Today, a small business could get up and running with accounting, CRM, customer booking, inventory management, scheduling, marketing, and invoicing software for a couple of hundred dollars per month.
However, many small companies that have been in business for decades continue to use outdated digital tools.
To be fair, it’s not as easy as buying the tools you need and calling it a day; you have to integrate these new tools into your business in a way that makes life easier for your customers and employees. That’s where the proceeds from your new business loan can help your business grow.
By using your business funding to finance training employees and hiring experts to help you modernize your operations, you can avoid major disruptions. In this way, you can overcome the inertia that stops so many businesses from using technology to serve their customers more effectively.
3. Upgrade Your Business’s Equipment
One of the most popular new business loan options is to upgrade your equipment. However, it’s important to be strategic about how and when you choose to invest loan funds in new equipment or existing equipment upgrades.
Typically, there are two ways new equipment can pay off:
First is the obvious one: better efficiency means more output at a lower cost. Over time, the cost savings of greater efficiency leads to more value for your business. What many people overlook, though, is how new equipment can open up new growth opportunities.
For example, let’s say you run a pressure washing business and you own pressure washers capable of handling light-duty projects. With this equipment, you work on residential projects like deck, driveway, or home cleaning projects. Without a larger, commercial pressure washer, you simply can’t accept certain customers.
However, if you invest in a more powerful washer, you can start accepting larger and larger projects. As you can see from this example, as you consider equipment upgrades, think about what new doors an upgrade can open for your business.
4. Test a New Market or Product Idea
The COVID-19 pandemic has changed the world as we know it. With that change has come new opportunities for savvy entrepreneurs. However, when you’re running an existing business, risking your cash flow on new ideas may not be feasible.
By carving off a portion of your new loan for testing, you can vet opportunities before risking a larger investment. Of course, you’ll still need to be creative in how you test your idea to get the best return on investment. A few ideas for testing new products from this Forbes article include:
- Create a prototype and talk to potential customers to gather feedback.
- Share free samples of your product
- Use test ads to gather initial projections on conversion rates.
Alternatively, if your business sells services and not products, you could adapt these ideas to test out a new market.
For example, a digital marketing agency that typically serves enterprises could target smaller businesses by testing out new service packages.
Conclusion: Focus on Funding Your Business’s Recovery and Growth
If you’re still struggling to decide what to do, consider conducting a competitive analysis.
After all, the world is far different than it was just a year and a half ago, prior to the COVID-19 pandemic. Plus, with Covid-19 cases decreasing in the United States, there’s reason to be optimistic about the state of the economy. There will certainly be opportunities for well-positioned small businesses to capitalize on this economic moment.
Through a competitive analysis, you may find greater clarity in terms of how you might spend your new business loan to maximize ROI.
In addition to conducting a competitive analysis, you may benefit from contacting your online lender to see how their other clientele typically utilizes their business financing options. They may have helpful ideas on how you can strategically use your loan amount going forward!
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.