When used strategically, business loans can be a powerful tool to improve working capital, support growth, and provide resilience during uncertain times. The key lies in choosing the right type of finance and aligning it with the objectives of the company.
Understanding working capital
Working capital is the money available to meet short-term obligations, this can include items such as payroll, rent, and supplier payments. A shortage can stunt growth, prevent a business from taking on new opportunities and potentially lead to missed deadlines.
When to use business loans
Business loans are often the best solution for:
- Covering seasonal dips in cash flow
- Investing in inventory or stock ahead of peak periods
- Expanding a team or physical location
- Funding marketing or growth initiatives
If a business needs flexibility, a short-term loan or revolving credit facility could be ideal. For larger investments, a longer-term loan offers manageable repayment options.
Types of business loans
- Unsecured loans – ideal for businesses with strong cash flow, no collateral needed.
- Secured loans – offer lower interest rates but require assets as security.
- Merchant cash advances – repay through a percentage of future card sales, perfect for retail or hospitality businesses.
- Revolving credit – like an overdraft but only pay interest on the amount used.
How to use funds effectively
A business loan should be used to improve revenue generating opportunities, not just to plug financial holes. For instance, upgrading systems or launching a new product line may provide a return that far exceeds the loan cost.
It is important to always match loan terms with the asset’s life span, short-term loan for working capital needs, long-term for asset investments.
Business loans in action: Supporting growth and resilience
We’ve recently supported a range of businesses using loans to drive forward their plans. A Gloucestershire-based marketing agency secured £100,000 to invest in business development, helping them build new client pipelines and scale campaigns. In Reading, a doggy day care business obtained £50,000 to fund the expansion of a new location, meeting growing demand for premium pet care. Meanwhile, a construction labour supply company in Oxford accessed £50,000 in working capital to maintain cash flow and meet payroll during a busy contracting period. These examples show how tailored business loans can unlock growth and strengthen operations.
Remember business loans, when carefully structured, can provide breathing space along with fuelling the needs of a business to thrive.
If you have any questions why not reach out to our team of business loan specialists. Call us on 01993 706403 or e-mail enquiries@ngifinance.co.uk.
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