5 Things You Must Do After Getting a Business Loan or Line of Credit

You just got business financing through a line of credit or a loan. How can you use your newfound funding effectively?

The flexibility to use funds whenever you need them means there’s no need to worry about cash flow problems. However, it’s critical to avoid the temptation to spend freely.

Here are five ways to make the most of your funds after receiving a small business loan or line of credit – while improving your company’s finances.

Make a Plan for Business Growth

You applied for a line of credit for a reason. Don’t lose sight of your vision after receiving a business loan! Before you start spending, sit down with your company’s key decision makers to map out a path for growth.

It might help to revisit your original business plan and remind yourself of the direction you planned. Start by reviewing your long-term goals. Then, break these down into steps until you have a clear path of how to get from where you are to where you’d like the business to be.

Carefully evaluate what needs to be done to complete each step toward your goals, and consider the ROI of any spending required.

You may choose to allocate funds for:

• Hiring one or more additional employees to handle daily tasks
• Automating your bookkeeping to minimize time spent on administrative duties
• Growing your online and offline presence with new marketing campaigns
• Upgrading business technologies and equipment for greater efficiency

Stick with your plan to put your business on track for even more growth in the future.

Anticipate Periods of Poor Cash Flow

It’s not always possible to know when cash flow might slow down. However, a plan for how to use your line of credit or loan when things change will prevent you from making poor decisions suddenly.

To figure out how much you’ll need to keep your business going:

• Calculate all fixed expenses
• Estimate variable expenses based on previous bills
• Consider any additional costs, such as stocking up on inventory ahead of a seasonal rush
• Add in a buffer for emergencies

Operating in an industry where slumps are predictable puts you ahead of the game with this tactic. Since you know when to expect a drop, you can time when to draw cash and cover your expenses.

Keeping cash flow consistent can also help you qualify for future rounds of business funding. Lenders are wary of big spikes and drops in sales, but a strong cash flow history shows you know how to manage money well, and can be trusted to make timely loan payments.

Create a Loan Repayment Schedule

You don’t have to make any payments immediately after getting funding through a line of credit. Although, any amount you draw will require regular payments with interest.

Calculate expected interest before you borrow so that you can estimate your total payments. Use this amount to create a payment plan in advance, being mindful of other expenses, such as draw fee.

The best repayment tactic is to make payments before the due date.

If your lender uses automatic withdrawal, you don’t have to worry about making the deadline. But, you will have to ensure there’s enough money in your business bank account whenever a payment is scheduled. Avoid making deposits at the end of the day or on Friday, as these may not clear in time.

Sticking with a regular payment schedule can improve your company’s overall financial picture. Do everything you can to avoid missed payments—including cutting unnecessary costs and paying down other debt—to boost your chances of being approved for more business financing in the future.

Monitor Your Credit Scores

It’s common practice to check your business and personal credit scores before applying for funding. But did you know you should also keep an eye on it after getting a business loan?

If your lender reports payments to the major credit bureaus, making on-time payments every time you draw on your credit line can improve your score.

Getting a copy of your credit report is usually a “soft pull”. This means you can request one as often as you like without affecting your score. The main business credit bureaus – Dun & Bradstreet, Experian and Equifax – charge between $39.95 and $99.95 for copies of the report.

You can also join credit reporting services like CreditSignal to get credit monitoring services, credit alerts and access to full reports for a monthly fee.

Why bother to pay for these services? Improving your credit score opens doors to more financial opportunities, including:

• Bigger loans with more favorable rates and terms
• Easier access to business credit cards
• Greater negotiating power on prices and terms from vendors

The better your overall financial picture, the greater your chances of achieving your goals for growth.

Take Advantage of Business Opportunities

In the past, you’ve probably had to say no to more than one promising business prospect due to lack of cash. With a line of credit, you don’t have to miss out on:

• Expanding a product line to satisfy demand from current trends
• Purchasing inventory in bulk to get lower prices
• Making early payments with suppliers to get discounts
• Investing in strategic partnerships to position your business in new markets
• Snagging great marketing opportunities to increase visibility
• Setting up a CRM system to improve customer service

Just remember to consider the ROI of any growth tactic before using your line of credit to finance it. An opportunity has to pay for itself, cover your interest payments and bring in a profit to be worth the investment.

Get Started with a Revolving Line of Credit

You can’t pursue these growth strategies until you’ve received a business line of credit! At National Business Capital, you may be eligible for a credit limit of $10,000 to $5 million—regardless of your credit score.

National offers a true revolving line of credit, which means you only pay for what you draw. You’re free to use the funding to improve your business any way you like, on your schedule, with no pressure. Get started today by filling out our 60-second application.