Many entrepreneurs associate a loan primarily with the crisis in the company and financial problems that make it impossible to finance the current operation with their funds. Therefore, they keep away from incurring financial obligations and decide to do them only as a last resort. However, more and more of them are beginning to realize that a loan can be a way to increase the company’s revenues. When is it worth choosing?
Development not only in small steps
The main goal of the company’s operation is to bring income. In many cases, it is high enough to be able to pay wages to employees and maintain the current production capacity, while guaranteeing its owner an appropriate standard of living, but at the same time low enough to prevent large-scale investments.
This means that many Polish companies are growing using the “small steps” method. It is a safe approach that may work in the long run, but it does mean that we will have to wait a long time to significantly increase profits. But what if we are ambitious and want to record rapid increases? Credit may be the only solution.
The purchase of new, modern machines, an increase in the number of workplaces, a larger office, more vehicles – all this costs a lot, but on the other hand, it can also significantly increase the efficiency of our company and the revenues generated by it.
Increasing the company’s income through a loan – when is it worth it?
A loan can allow us to significantly increase our revenues – but not always, so we must approach such a solution carefully. The amount of the loan should be scaled to our financial capabilities (as well as the ability to convert the borrowed funds into a larger amount) and the potential profit from taking it.
In short, it is worth considering increasing the company’s income through a loan, when we can earn more than it will cost us (because it should be remembered that a loan is not only borrowed capital but also interest, commission, and other costs). For example, a loan for PLN 7,000, for which we will give the bank a total of 10,000, can be considered advantageous if we use it to buy and sell additional goods, obtaining an income of PLN 20,000. This means a pure profit of PLN 10,000.
The mere fact that such an operation will bring us any profit, however, does not immediately mean that it will be beneficial. We also have to take into account the need to spend our own time and nerves on it, therefore a loan on which we will earn, but relatively little (for example several hundred zlotys), may not be worth our attention.
The whole process will be more profitable for us, the lower the costs will be associated with the loan. Cheaper credit means that we have to make less profit from it to make it profitable. Therefore, it is worth choosing it with the help of an experienced credit broker – this way we will be sure that we will take advantage of the best offer.
Estimate the risk well
With the loan, we can increase our income very quickly and make investments that would normally be beyond our reach. This does not mean that we should jump into too deep water. A large loan can mean a high risk that you will not be able to properly use the borrowed funds and turn them into profits at the rate we hoped for.
For example, we may take out a loan to buy additional goods, but ultimately we will not be able to sell them in as much or as quickly as we expected, or because it turns out to be too burdensome for the company that previously served smaller quantities of goods or because of lack of demand.
Therefore, before taking a loan, we should carefully assess the risk associated with it and make sure that even if the case does not go completely as planned, it will not be associated with a serious financial threat to our company.
A loan as a way to increase the company’s revenues – summary
Many entrepreneurs who have so far been afraid of loans are starting to see their usefulness. We must remember that currently in many industries there is very fierce competition and too slow development or the complete lack of it may mean that rivals will quickly gain an advantage over us. Therefore, it is worth considering such a solution, especially if we are sure that we will be able to generate a sufficiently high-income thanks to the borrowed funds.