Receiving the funds from a small business loan is exciting, especially considering all the hoops you had to jump through to get approved. But now you’re sitting on a chunk of change — while wondering how to best put it to use to the advantage of your company.
The secret is that there’s no single right way to use your first small business loan. It’s more like a “choose your journey” scenario, where you’re standing at the starting point and surveying a variety of potential paths forward. The route you choose ultimately depends on the needs and goals of your business.
Here are some potential uses for a small business loan worth considering.
Build Your “Emergency Fund”
When it comes to our personal finances, we’re all encouraged to build up an emergency fund to protect against unforeseen expenses and emergencies. As you can imagine, financial pitfalls can also crop up and threaten businesses.
This is why so many experts recommend prioritizing an emergency fund for your small business. These funds will come into play if your normal business operations get interrupted. Look no further than the COVID-19 pandemic and its effect on many businesses to find proof that having an emergency fund is crucial.
The amount you set as your emergency fund goal depends on how much padding you want to have and how much it costs your business to operate each month.
Improve Your Company in Targeted Ways
It’s tempting to want to start applying your loan funds far and wide, but experts tend to recommend making targeted improvements. This means sitting down and coming up with a strategy.
According to Verizon, here are some examples of specific improvements you may decide to make using funds from a small business loan:
- Overhaul your business plan
- Enter a new market niche
- Launch a new product or service
- Improve your website
- Invest in new technology/software
In other words, think about which areas of your business you’ve been meaning to improve and funnel the funds toward whichever areas will produce a measurable impact on your bottom line. When in doubt about how to proceed, refer back to your business plan to check in with your objectives and projections.
Optimize the Customer Experience
No matter your sector or niche, few things are more important than the experience customers have with your company from the beginning to the end of the sales funnel. There are always opportunities to remove friction here — to provide a better customer service
Look at ways to apply your funding to remove customer pain points, or to make passable processes even more positive. This is an opportunity to strengthen customer relationships, ramping up loyalty and retention rates.
Work on Skill-Building
Have you been wanting to attend a professional seminar, buy some business management books, or book a session with a mentor? Or, have you been wanting to help your employees gain skills in specific areas that will take their performance to the next level?
This is where those small business funds can really come in handy — to finance skill-building. Ideally, the new skills you and/or your employees learn will pay dividends in the form of better decision-making.
Only you can determine the right ways to use your small business loan based on the gap between where your company is today and where it wants to be tomorrow. Each of these areas represents an opportunity to solidify and grow your operations.