When asked about the first steps towards obtaining a small business loan, most business lenders will agree that you should begin by asking yourself a question: What is the true reason you are thinking about applying? If you intend to make the best use of the borrowed funds, your answer will not be singular. While your primary reason might be a single expense (new equipment, new hires, bulk inventory, etc), this is not the only reward you will reap should you be approved for your desired amount. Any experienced business owner knows that one major benefit should logistically lead to several others. For example, after covering your expense, you might also stand to increase profits, build business credit, or save a lot of money.
Applicants who are particularly concerned about the third example would be wise to consider a revenue based business loan, or for those who know business lending industry jargon, a business cash advance. This type of working capital loan is best-suited for long-term investments, which tend to offer the most potential for cutting costs.
Here are 3 ways a business cash advance can help your retail business save money:
Many small business owners rave about how much money they’ve saved from outsourcing tasks. So, why don’t more of their peers take their advice? One possible reason is that in most cases, the tasks that are most commonly outsourced are not the kind that contribute to revenue right away. As essential as a new website or expansive social media presence may be, you won’t see any contributions on paper for at least a number of months. Not everyone can afford to pay employees for this long without a simultaneous increase in revenue. And if you work in a tumultuous industry like retail, demand can change at anytime. Adding to your payroll expense might not seem like a good idea when revenue appears to rise and fall at random.
With a business cash advance, your payments are based on how much overall revenue (not just from debit or credit cards) your business takes in day by day. In the likely event that revenue falls a little before your outsourced employee begins contributing to revenue, your payments would be small. Even though this new employee is of tremendous importance, the size of your payment would give the impression that you have merely hired a part-time intern. You would essentially be saving even more money than you would by using your own money to outsource a task, which is estimated to save a business at least $4,000.
Aside from outsourcing tasks, one of the most popular ways for small businesses to save money is by using less physical space. Unless you own your space, rent is a major overhead expense each month. You’ve probably never thought about the benefits of eliminating just a couple hundred square feet. But a big part of business growth is becoming more efficient. You need to maximize the use of every square foot of your property, and make sure you are only using your space for purposes that cannot be shifted to another location. In the retail industry, efficient office space goes hand-in-hand with efficient inventory management. It might be time to rent a storage unit or move to a smaller space, both of which can be considered long-term investments.
Moving forward with either of these two options is risky if it’s done at the wrong time. You wouldn’t want to do it when business is doing well since it could inhibit your momentum, not to mention the various other things you probably have going on during a busy period. This is where a significant advantage of revenue based business loans comes into play. Unlike some other business funding programs, your cash flow doesn’t need to be at its peak in order for you to be approved. Plenty of UCS clients take out business cash advances when business is slow or stagnant because they are able to pay off the majority of the debt when sales volume increases later on.
Speaking of slow periods, a particularly treacherous rough patch can force small businesses to miss payments to vendors. This can seriously damage your reputation while costing you thousands of dollars per year in late fees and credit card charges. Revenue based business loans are fabulous tools for avoiding this scenario, and not just because you don’t have to make substantial payments in the first few months. When you pay bills early or promptly for a long time, vendors will likely be willing to offer discounts to those brave enough to ask for them. Your overall business expenses will be lower by the time your cash flow improves and you’d be making the largest loan repayments.
Revenue based business loans are far from the only business funding program that can help you save money. A business line of credit, working capital loan and accounts receivable factoring can produce similar results if you are given the right program for your individual circumstances. At UCS, we know that every retail store has its own cash flow situation and we are therefore willing to make sure you stand to receive as many rewards as possible from your entire small business loan experience.
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