If your SME is focused on simply getting through the month and having enough money to pay the bills, keep HMRC off your back and meet your payroll obligations, you might find that you don’t have much surplus cash left over to put into a savings account for big picture needs.
You aren’t alone in feeling like you don’t have enough capital to take the next step in your company’s growth trajectory. Many small businesses simply don’t have access to enough capital to comfortably operate. According to Forbes, around 30% of UK SMEs have little to no cash reserves. Xero meanwhile reports that half of small business owners are concerned about their futures, and more than seven in ten report cash flow issues.
Not having enough money at hand isn’t just enormously stressful and harmful to the health of yourself and your business. It can also prevent you moving forward, limit your capacity for growth and see great opportunities pass you buy.
This isn’t new. But it doesn’t have to continue. You can use a working capital loan to access the funds you need to put your growth plans in place. If you’re wondering ‘what can a working capital loan be used for?’ read on to find out.
Use it to upgrade your equipment
Working with old and outdated equipment is a huge false economy – but without enough cash to invest in upgrades, it’s probably your only option. Depending on how much you borrow, a working capital loan could upgrade your entire equipment or machinery fleet, giving you modern new machinery and tools. There are myriad benefits from this investment:
Lower repair and maintenance costs: Newer equipment and more modern machines are more reliable and should need fewer repairs. This means that you’ll spend less on fixing broken parts and call-out fees. Maintenance should be easier and less expensive, too.
Greater efficiency: New equipment is often more efficient, allowing you to make productivity gains. This could see you increasing your output or completing jobs in a shorter timeframe, helping to boost revenue.
Automation: Depending on the type of machinery or equipment you need, you may be able to benefit from advances in automation. This again can seriously increase efficiency and productivity, but it can also free up your team, creating more time which can then be spent on other things.
Energy savings: If your older machinery and equipment is energy intensive, another key advantage you’ll start to feel the impact of right away is lower energy bills.
Use it to establish a physical presence
Setting up a bricks-and-mortar location where customers can visit you and see your range or discuss your services isn’t a low cost commitment. But it could be just the injection of vitality your business needs.
Having a professional office, showroom or a store where your customers can speak with your team, see your products first hand or book a consultation provides an invaluable opportunity to make more sales and build closer relationships with your customers.
Many buyers prefer in person experiences when choosing a service provider or purchasing a product, so a physical space could be just as important (and drive as many sales) as your online store. However, the one thing it isn’t is cheap and without a working capital loan, you may find that the outlay required puts this stage of development out of your reach.
You could use a working capital loan to:
Acquire a space: Covering the initial lease, rental or deposit costs for purchase is a huge financial commitment. You could use funds from a working capital loan to cover that outlay.
Pay for fit out and design: Once you have the shell of your physical location secured, it’s time to think about the fit-out and design. Whether a corporate office to welcome clients for appointments and consultations or a retail store, you’ll need a designer and a fit-out team to build out your space.
Recruit new staff members: If you’re opening a new location, you may find that you need additional team members in place. Funds from your working capital loan could be used to recruit, train and equip new recruits with everything they need to drive your business forwards.
Upgrade your fleet of vehicles
While a vehicle such as a delivery van does call for a large investment, a newer vehicle can bring with it notable cost savings and lower running costs. You may find that associated expenses such as road tax and insurance are lower, while fuel efficiency could be better, helping to reduce operating costs.
Expanding your fleet could also bring with it business benefits, by allowing you to complete more deliveries, send team members out to see more clients or put another representative on the road. This could lead to speedier responses for clients, increase your capacity or even allow you to expand your network. All of this could add up to greater revenue for your business.
Use it as a deposit: You could use a portion of your capital injection to either pay for the vehicle outright or, to pay for the deposit and then proceed with regular monthly payments.
Vehicle branding: Having your vehicle branded is always a good idea, as it provides a mobile ad for your business. Wrapping your van or car in your brand logo and company colours also adds a professional edge when arriving to see a client.
Consolidate debt
There’s no rule that says a working capital loan must be used to buy something new, such as an office space, a vehicle or machinery. You might decide to use it to consolidate your debts and pay off a few bills. If you’ve got a large monthly credit card bill for example, you could well be paying more in interest than off the balance due. Paying it off could save you thousands of pounds.
Pay off HMRC: Use your working capital loan to clear off any amounts outstanding to HMRC.
Clear your credit card: Paying off your credit card bill relieves you of the burden of large interest charges each month.
Pay other debts: Having multiple debts can be difficult to juggle and can see you paying over the odds in interest, late payment fees and penalties. Paying them all off and consolidating your debt into one payment can be easier to manage, easier to budget for and save you money in the long run.
Ask us about a working capital loan
We offer small businesses working capital loans of up to £250,000. Whatever your cash flow gaps or expansion plans, we provide a fast injection of funds that frees you to go to about your day and keep those business wheels turning.
We’re not a stuffy lender and we won’t make you jump through hoops to secure the capital you need to move on. Give us a call or send us a message to see how we can help.
