7 Ultimate Reasons Why Successful SMEs Get a Business Loan
Alwin Goh
Small and medium enterprises (SMEs) continue to be one of the biggest players in Singapore’s economy. Based on a survey conducted by SME Magazine, SMEs continue to grow amid economic difficulties. The data also showed that the average revenue increases by about 109% than the previous year.
As SMEs increases in numbers, we have observed that among the major challenges they face is the lack of capital. As they continue to gain competitive advantage, they realize that funding is needed. Existing capital is not enough to support growth and achieve its goals.
Among the key characteristic of successful entrepreneurs is that they never lose sight of their goals. And they believe that it can be achieved by dedicated and by getting additional funding. Thus, business loans become a powerful tool for SMEs. And there are various goals why businesses wanted to take a business loan.
Rapid Expansion and Growth Rate
Successful businesses never stop exploring and growing within their industry. If they gain more revenue, it is still not enough. Relying on their excess cash can further delay achieving their goals. To grab these opportunities, SMEs takeout a loan to support their expansion and new investment goals. In the end, business loans help them in realizing a rapid growth in the industry.
However, it is vital that when taking a business loan, you must have a clear forecast for your revenue. You have to make sure that your expansion or new investments are profitable. In this way, you can be able to forecast your repayments.
Increase Inventory
Time is money. Although we commonly hear this, this important especially with SMEs offering seasonal items. Like in the retail industries, you can be successful if you are always ready and prepared for each profitable season. Existing cash-flows are insufficient, like preparing for the holiday season. Successful entrepreneurs do not limit the inventory that they will sell during holidays. They usually double or increase it than regular periods. And they end up seeking extra capital to buy a large amount of inventory. Taking a business loan is simply the answer.
Capitalize on new technology and equipment
Every business wanted to attain efficiency and they seek for new technology and equipment. As soon as they found out valuable technology or equipment, they end up purchasing it. It can help them in speeding up their production or increasing their productivity rate.
Eliminating or Avoiding Cash-flow Issues
Among the biggest challenge that you can meet along with the operation are the cash flow issues. Like for example, you don’t have enough funds to pay for the suppliers or lack of funds for rental fees. If you haven’t prepared for this, it can lead to business failure.
Successful business owners have found a way of eliminating or avoiding a cash flow crisis. Securing a short-term loan is the answer to achieving a positive cash-flow. It can help in paying for regular bills, rental fees, or for employees’ salaries.
Building Credit Profile
Knowledgeable with money management is one of the key skills of a successful entrepreneur. Having a big plan in the future is also a key trait. These SMEs never stop in finding ways to achieve a rapid growth rate. To achieve this goal, securing a business loan is an answer. They started with the smallest loan offer and repay it on time. As it continues to be a responsible borrower it leads to having a high credit score.
With a high credit score, licensed moneylenders offer the larger loan package. Another perk of having a good credit profile is that they can have a low-interest rate. Just take note that in taking an initial loan it is essential that you have aligned it with your capacity to pay.
Cheaper than Equity Financing
With equity financing, you can have more cash but there are lots of downsides. In the long run, it is a type of financing that is much expensive. It requires giving up a percentage of your business. Whether it’s 5% or 10% when seeing the whole picture, you are losing that money within the business life span. Unlike with loans, it has limited repayment terms. It will take either 2 to 3 years or more but not within the whole business lifetime. In addition, it is a wiser decision to take a loan, since you can choose from either a fixed or flexible repayment options.
Smart entrepreneurs take debt financing also since they knew that they still have full control over their business. This is also a wise option since it has tax benefits, it’s tax-deductible. Forecasting is also much easier because you either have a fixed or flexible repayment with standard interest rates and fees.
Capitalize on Strong Business Opportunities
An awesome entrepreneur always opens its doors for opportunities. There will come a time for huge discounts on bulk orders, low rental fees, or discounted prices on the equipment. Taking a short-term loan is an ideal solution to capture these opportunities. By giving discounts, it will allow a business to increase its revenue. Buying some capital-intensive machinery can also increase productivity. This is mostly seen in manufacturing industries.
In taking capital to fund your growth opportunities it is ideal to conduct a revenue forecast. By doing this return on investment can be identified. It is vital to see how much it can contribute to your revenue.
Key Takeaways
An SME will attain success as long as it is consistent to achieve its goals. It never stopped finding ways to increase its growth rate. Getting a business loan is an ideal option when you wanted to reach success for your business.
If you are currently an SME owner with less than 1 year in the industry it might be hard to take a loan especially with traditional lenders. Interests are also high. But with a licensed moneylender, you have the option to choose among the loan packages. You can also choose either a fixed or flexible term, paying what you only owed.
When you want to make your business grow further, don’t be afraid to take a business loan. Capitall Singapore is here to help you.
