Online lending is a great way for small business owners to get the capital they need to help their businesses grow.
But they’re not for just anything. Before taking the plunge on a five- or six-figure loan, you need to ask yourself a couple of things: How will you pay it back and — even more importantly — how will it pay you back?
Online lending makes getting access to necessary capital exceptionally easy — often just a few clicks on a website or mobile app. Projects perfect for an online loan are ones that have measurable ends and an obvious ROI (return on investment).
Here are examples of how an online loan can make a BIG difference in the life of your company.
1. To temporarily cover payroll as you take on new clients
Your business is on the upswing, but you’ve got so much demand for your services that you can’t keep up. You need to hire more people to take on all this potential new work. Until you get paid by all these new clients you want to take on, you can’t pay for the new employee(s)!
A small business loan could cover a new employee’s payroll for a month or two while you wait for those shiny new clients to pay their bills. Once you’ve been able to expand, thanks to that trusty new employee, the increased revenue should help you pay for their wages and repay the loan on time. Your new clients will tell their friends and colleagues about your good work, and your business will continue to grow.
2. To weather lulls in cash flow (and even take advantage of them)
Many Kabbage users are e-commerce sellers. How can a small business loan help your e-comm business? Well, you could use a Kabbage loan to stock up on inventory in the summer, when prices are low and sales are sluggish, and then hold onto that merchandise until the fall and winter, when demand picks up and prices increase. Without Kabbage, you wouldn’t have the money to make those purchases, since your own sales wouldn’t provide the necessary revenue during those slow summer months. By doing this, you’ll be prepared to cash in on the best pricing and the busiest shopping season while turbocharging your business’s growth.
Even with the fees tacked onto your loan, you’ll still come out ahead. An online loan or line of credit can give you the capital you need to exploit the sales cycle.
3. Upgrade your systems
Let’s say you’re a used and rare book shop owner, and you’ve been doing business on the Internet. Online sales are starting to pick up, and you’re building a reputation outside the small Midwestern city where you’re based. But your payment systems are slow and out of date. Potential customers are irritated, and you can tell from your analytics that many of them get frustrated and give up rather than deal with your creaky old checkout process. You know that upgrading to a sleeker new interface will solve all your problems, as well as improve your shop’s image to out-of-state customers.
But website redesigns and new e-commerce systems cost money, and it’d take a lot of signed first editions of A Tale of Two Cities to pay for it. A loan can help you upgrade ASAP and then use your increased sales and web presence to pay back the money over time.
There are lots of ways a small business loan can help you expand, but be sure you have a measurable goal in mind before you take the plunge. Once you do, check out our friends at Kabbage for fast, straightforward financing.
Bonus: For a limited time, HostGator is offering Kabbage qualifiers a $100 Amazon* gift card.
*Customer will receive a $100 Amazon gift card upon submitting a qualified application to Kabbage by 11:59pm EST October 11, 2016 through the link provided in this post. The gift card promotion is being run by Endurance International Group. Gift cards will be delivered to qualified customers electronically November 11, 2016. Amazon is a trademark of Amazon Technologies, Inc. Amazon is in no way affiliated with or a sponsor of this promotion.
Henry Green is a freelance writer based in Austin, Texas who helps small businesses and entrepreneurs improve their online presence through marketing, social media, and website optimization.