How to grow your business with a working capital loan

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How do you grow your business with a working capital loan in 2021?

Back in 2014 I had attended a wealth seminar in search for new ideas and opportunities. There were a few speakers, including international guests pitching their brand or business. The place was buzzing with entrepreneurs and business owners. We all were to the brim with enthusiasm and ambition.

One speaker that really stood out for me, was a personal development coach called Peter Sage. Peter mentioned a few principals that hit home. Most noteworthy to say that I have been using them since.

One of these principals is that often we just need a better strategy. Okay. Our economy is on the brink of collapse and the rand has been taking a beating against the dollar. (R16.44 at the time of writing this) Fact is that there are many reasons to complain. However, some of the best money is made from these conditions. You know, taking advantage when you see an opportunity to grow your business.

Now the question begs. How do you grow your business with a working capital loan?

The corona virus has had a massive impact on economies across the globe. Subsequently pressure has filtered down to smaller companies. Next, stock started drying up because imports from China eventually halted. Being the biggest producer in the world, it is obvious that import and export  has to run like clock work. The chain reaction of this is where things happen and opportunities become available.

We have to think about businesses that will close as a result. Problems like the inability to replenish stock from suppliers will devastate cash flow. Manufacturers cannot import material or export products and parts. The result of companies going bust, unfortunate as it is, creates opportunities. Such an unfortunate event still provides enough opportunity to increase your client base and revenue easily. If your business won’t, someone else’s will!

Use a working capital loan with careful planning. A few things can help to better position your biz

Source stock from alternate suppliers as a short term solution. Still lucky enough to import? You can stock up to counter potential further restrictions that could affect your business. Funding operational costs allows your business to withstand periods of slower growth. It also makes it possible to service an influx of new clientele, thus allowing your business to grow.

Unsecured business funding generally does not carry any early settlement fees or penalties. This is an excellent tool that can be used to your advantage. Depositing excess funds into the loan facility lets you save on the interest. Interest for our unsecured funding solution is only charged on outstanding capital. It allows you to cut back on the cost of funding with increased revenue.

Let’s take a closer look at the differences between unsecured vs traditional funding. Noting a few quick wins.

  • The application process is online and has little or no paperwork. Traditional lenders will request detailed documentation, with a possible number of branch visits.
  • Funds is delivered within 72 hours, securing transactions quickly. Traditional lenders can take weeks to disburse funding and leave your hands tied for the period…
  • There is no security required versus the preference of attaching assets as security by traditional lenders.
  • Costs are exact and will reduce when excess capital deposits take effect. The traditional option costing varies over time.
  • Depositing excess capital can be done to the extent of early settlement. In this case there are no penalty or early settlement fees. This is contrary to the traditional models that lack flexibility with fixed repayment periods.
  • Traditional lending models place restrictions on the use of funds. Use has to be agreed on for a specific purpose. This is in contrast with unsecured lending where providers have no restrictions imposed.
  • The success rate is much higher, largely due to a much more personal touch and attention to detail. There is need for improvement in customer service with traditional lenders. And this resonates with a low success rate on approvals.

An important question that you need to ask yourself. How financially prepared is your business to take advantage of opportunities on the market?

The analysis puts business performance in the spotlight during a funding application. Discretionary income is a key factor that independently weighs in a great deal on the outcome of an application. The analyst will want to see a cash flow that can demonstrate that it can service the debt cost.

Here are a few examples of estimated repayment amounts based on the stipulated working capital loan amount. The estimated monthly payments are based on a 12 month period.

Working Capital LoanEstimated monthly repayment
R100 000R11 200
R200 000R22 500
R500 000R56 000
R1 000 000R112 000

Above is a good guideline for business owners to see how much funding they are able to service, comfortably allocating discretionary income. A frequently asked question. “How can I get more discretionary income without getting the funding upfront?”. Business owners are spending carefully and that means even revising price heavy expenses like insurance policies. I personally saved 60% when I moved insurers two weeks ago. You will be surprised how much you can trim without conceding cover. Especially when insurers are getting very competitive for customer acquisition.

Better positioning in the market may not be a one size fits all solution though therefore some industries have proved to be a better fit..

Here are “good fit” industries but not limited to:

Consulting & professional services
Health & medical
Hospitality, tourism & events
Finance & insurance
Food & beverage

The landscape can change as the effects take hold of the economy. It will become the small to medium businesses in south Africa that can take the lead and there will be a great deal of head room for growth.  A truly spectacular setting for many business owners that are looking to reach newer heights.

Thank you for reading this blog, based on funding facts and my personal opinion on business ideas.

We offer a professional consulting service to assist businesses and private professionals to obtain funding. You can learn more about our unsecured business funding solution on our website.

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