Bizhack: How to Use an SME Working Capital Loan

Your competitors are likely using the SME working capital loan to help them thrive in their businesses and especially so since the supplementary budget announcement on 26th March 2020 by Deputy Prime Minister, Mr. Heng Swee Keat. Thus, it makes sense for you to consider the same thing. Success needs more than just having a plan, even more than just hard work and dedication. Financial agility, accountability, and power are required in order to achieve such goals.

Complex business cash flow issues have a relatively simple solution: to get a business loan. An SME working capital loan is a distinct type of borrowing, as opposed to general small business loans, factoring, or credit cards. There are many benefits in tapping into these funding alternatives.

1. Bridge Payment Delays

Some of your business partners might be a little slower if you back up on payments for a couple of weeks. This is especially true of industry peers: companies of your size and age. It would help if you had a way of bridging payment delays without incurring high costs. While nobody likes to borrow money, a lot of successful companies are doing math and realizing that a working capital loan is actually cheaper than paying the fees and interest rate on some revolving credit facilities.

2. Pay Your People

No business owner likes to see the payroll number appear in the books. As your business grows, payroll costs can go up faster than anything.

Even if you have a great team that provides excellent value, you may not see an immediate return. If revenue lags, utilize working capital to bridge pay gaps. Retain the people who are bringing the money back to your company.

3. Stock Up

If you are a retail business, you know that inventory is a liability. There are times when you need to overstock. This includes rolling out a new product, going into a busy season, or purchasing in bulk for a bigger discount.

Promotions and trades are also a good time to consider the expansion of your capital resources. Make sure your merchandise liability is not a threat to other aspects of your business.

4. Whether the Storm

A lot of businesses depend on busy seasons to take them through the slow months such as:

• Equipment or vehicle rental centers
• F&B and Retail
• Wholesale Traders
• Residential contractors
• Outdoor recreation facilities
• Building contractors

Whether you are directly involved in or providing services to one of these industries, you feel the crunch during the low-income times of the year.

The SME Working Capital Loan is an economic equivalent of saving on a rainy day. This is why the limit has risen from S$300,000 to S$1,000,000 to help the SMEs to curb the CoVid-19 outbreak. Work on your accounting for the cost of the loan, if not, speaks with Finnex Consultants and you don’t have to worry about under-borrowing or over-borrowing that adds oil onto any spark of fire.

5. Hire Quality Labor

One of the easiest ways to get ahead in any business is by empowering your team. This could mean hiring experts in your field to pad the roster for busy seasons.

There is also a universal truth about doing business when it comes to human resources: you get what you put in. You will need to be able to offer a competitive compensation package to get the best candidate for a position.

Use a working capital loan to improve employee benefits, provide better pay, improve the working environment, or send them for training to equip them with the necessary skills to boost the upturn when the CoVid-19 outbreak has slowed down.

6. Operate Smoothly

Telling a lender that you want to operate more efficiently is probably too general a statement. Make this specific to your own business. Identify the vulnerable points in your business before you apply for a loan. These are usually bottlenecks, processes, or inefficient tools that cause chaos or require regular workarounds.

Use a loan to improve your business tools and educate your team on how to avoid costly problems.

7. Marketing and Advertising

Advertising and marketing are two of the most popular reasons why small businesses apply for loans. The extra budget gives freedom to try out new types of tools and tactics, such as social media marketing, event sponsorship, community outreach, or publishing.

You can activate your strategic level by hiring analysts, outsourcing to a consultant, or only by obtaining a professional analysis tool to do it yourself. That way, you cover the two most important aspects of the marketing process.