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How to Set New Goals for Your Business After Receiving a Business Loan?

Lana Vrz by Lana Vrz
2020/11/19 | 1:39 pm
in BUSINESS
4 min read
0
How to Set New Goals for Your Business After Receiving a Business Loan?

Small business loans are a convenient tool for companies seeking to grow their operations and reach, as fresh funds in the form of working capital can be injected into multiple projects that can ultimately push the business forward.

However, being disciplined when it comes to how these funds are deployed is key to make sure they end up serving the purpose they originally had.

If you are a business owner and you are not familiar with the term working capital, you can visit caminofinancial.com to learn why it is important and how the right financing can keep your business afloat and make it grow.

In this regard, establishing goals and monitoring the progress made toward them periodically is an important task that small business owners have to incorporate into their routine to make sure the business gets a return on the investments it makes.

In the following article, we will discuss how to set new goals for businesses who have already been granted a small business loan to assist business owners in keeping things on track.

Source: Red Brick

Managing cash adequately is a key element for the success of a small biz

A recent survey from business mentoring network SCORE found that nearly 82% of the small businesses that fail in the United States do so as a result of poor cash management.

Cash management refers to the task of overseeing the business’ cash inflows and outflows to make sure there are enough resources to cover for essential expenditures and for any investments that are required for the business to advance.

What is the money for?

Small business loans can be used for a wide variety of purposes such as buying more inventory, expanding the physical premises of a store, or investing in fixed assets required by the operation.

SCORE’s findings, which came from a survey applied to 1,000 early-stage businesses in the United States, found that most small business owners used the funds to buy equipment, inventory, or to pay for marketing expenses.

Since equipment investments are not necessarily going to generate positive cash flows immediately, business owners must be prepared to cover the installment payments associated with the loan regardless of whether the business is generating money out of the investment already or not.

For that reason, the purpose of the loan remains the most important aspect to keep in mind when deciding if such a financing instrument is the right choice to grow the business at the moment.

Source: AllBusiness.com

The importance of establishing key milestones and deadlines

Whatever the purpose of the loan is, business owners must keep track of how these resources are deployed by those responsible to execute the projects to assure that the desired outcome will be achieved.

To accomplish this task, setting milestones and deadlines for the team in charge of overseeing the use of these funds is one way in which small business owners can keep track of their progress.

These milestones and deadlines should be both feasible and challenging at the same time, as this helps in establishing an equilibrium between advancing toward the goal promptly while leaving enough headroom for the team to care for the quality of the outcome as well.

Appointing the right leaders and responsible parties

If there is a team or a department in charge of deploying the funds from a small business loan, the manager should tell them that they will be accountable for how the money is used and how that contributes to achieving the company’s goals.

This helps in aligning the interest of both parties involved – the business owner and the leader of the project – while positive reinforcements and incentives can also be used to further encourage the team leader in using the funds wisely.

An example of this would be to grant a bonus to the team leader or to those involved in the project if certain milestones are achieved – i.e. a percentage of growth in sales, or a certain amount of money saved as a result of the project.

Source: Bankrate

Monitoring progress periodically

Small business loans generate a borrowing cost for the firm and that is the main reason why managers should oversee how the funds coming from this source are deployed.

Certain tools can help in this endeavor, as is the case of cash flow projections and budgets, along with performance metrics depending on the business nature and the purpose of the loan itself.

For example, if a company has taken a small business loan to expand its salesforce the manager can establish sales quotas for the new team as a way to measure their productivity.

The success of this team should help generate the cash flow needed to cover the cost of borrowing the loan.

Adjust the course when needed

The benefit of progressively tracking how small business loans are used within the organization is the possibility of adjusting the course if the situation demands it.

It is way more cost-effective to change things at an early stage before any more funds are used than finding out things didn’t work out as expected way down the line.

Meeting directly with the responsible parties tasked to oversee how the funds are deployed and monitoring them through a set of unbiased indicators should help in quickly identifying any deviations from the forecasted outcome, which would allow the owner to jump in and make changes before it is too late.

Source: Medium

Final word

Small business loans are financing instruments that can be used to grow and expand a firm’s operational capacity but the fact that they generate an additional expense for the business demands the attention of the owner/manager to make sure the money is used appropriately.

Setting milestones, deadlines, and appointing responsible parties are some of the recommendations that we have outlined above to make sure the money obtained from these loans is used as intended and in a way that ends up delivering the expected outcome.

Are small business loans a convenient way to finance your business needs now?

How would you make sure the funds obtained are deployed adequately?

If you are looking to grow your business, then a small business loan is a great opportunity to make it happen. If you’ve gotten this far without outer financing means that you have what it takes to run and administrate a small company. Now think of the possibilities you can grab if you access more capital. Find the best financing for your business and achieve those goals.

Tags: BusinessBusiness LoanCashMoney
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