Welcome in the series of loan articles, in this series you will learn all about loan and how to use effectively those loans in your business and daily life. In this article we will learn about “How To Use Business Loan Effectively”.

Importance Of Business Loan

Business loan is important when you and your business cash balance goes down or empty. Business loan is an essential element of a business in today’s world as it can used in different event such as

Low Inventory

When your business goes inventory less or low inventory, you can use business loan for buying those inventories. Business loan is usually used for purchasing and investing.[Personal Loan]

Paying Short Or Long Term Debts

Sometimes a business has not enough debtors or cash to pay it’s liabilities, in this case business loan can be used to get rid of this issue.

Investing In Equities

When a business get favorable offer but have not enough balance to get that proposal, a business or an enterprise can use business loan to acquire the entity.

Buying Of Sundry Assets

Sundry assets are those assets which are used frequently in a business, when a business daily or frequently asset get damage or get useless then loan can be used at this place to fix the issue. [Home Loan]

How To Use Business Loan Effectively

When a business is started by someone lots of issues are occurred, many people get confused when these issues are arises. If you want to avoid lose and run your business properly and smoothly then avoid from these mistakes

  • Excess Expenditure
  • Buying Of Excess Assets
  • Extra Employees
  • Avoid Extra Sundry Expenses
  • Banked Immediately

Excess Expenditure

Excess expenditure is the big enemy of any business, if you want to avoid your business to shut down then avoid from all those expenses which have no connection with your business such as

  • Offering breakfast or lunch to those employees who lives near areas
  • Giving fuel benefits to permanent employees
  • Entertainment expense etc

Buying Of Excess Assets

Assets are very important and fuel for a business but excess of assets are dangerous for a business. Suppose your business needs a single machine but you buy two machines at the same time and the second machine is being kept in the wear house idle, this stops the circulation of the fund which is not good for a business, avoid from buying excess assets can help you to have some balance in your business account which you can use in difficult time.

Extra Employees

Employees play an important role in business growth. No operations can take place without employees so whether a small business or large one, every business needs for employees. Employee turnover ratio is very important ratio and it should be balanced if your business needs 100 employees for business operation and you have 110 employees then those 10 employees wages increases labor cost and it increase idle time which is directly related to overhead and when the overhead increases your product cost increases and when product cost increase your cost of sale increase and when (COS) increase your profit decreases.

Sundry Expenses

These are small expenses but occurs frequently so avoid from excess sundry expense to keep enough balance in your business account to use that balance in difficult time of business.

Following are the sundry expenses which occurs in the business

  • Gifts
  • Donations
  • Fees
  • Stamp and office papers etc

Banked Immediately

Whenever you get cash from a customer or client deposit it in your business bank account immediately because when you have cash in your hand you will consume it in different places whether in excess need or on entertainment, it will give no benefit but when you banked it then you can use it in different ways such as

  • Paying your debts
  • Buying assets of business use
  • Purchase material for your business etc

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Naveen Rajput

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