An SME’s Way to Managing Business Finance – 4 Useful Tips

Managing money is a concern for any business, but an SME that has just started its journey towards growth needs to take every step with care. Unplanned investment in any new activity can result in extra burden on their finances or may prove to be unfruitful for the venture. Successful entrepreneurs would advise young and budding enterprises to refrain from any such measures, and to expend the capital with care.

Besides administering the existing funds, it is also important to choose the right lenders to expand the project and apply for business loan. By availing a loan solely based on a lower rate of interest, a company stands to lose upon a range of benefits that come with the credit products from alternative lenders.

If you wish to make your business more economical and also plan to kick-start its development by soliciting funds through a business loan application, here is a list of tried and tested methods that will help you achieve both:

Operational Measures:

1. Cut Costs

While trying to maintain their profitability, many entrepreneurs may focus only on sales and disregard any measure to lower their expenses. Interestingly, there are a number of ways to reduce the variable costs of a business without causing any impact on the quality of products and services that it offers. One of these is to opt for cloud computing solutions. More and more businesses have been opting this strategy, thanks to the several free or low-cost that are available in the market today. They realise that spending on technology is more affordable than hiring new people on an extensive scale in the early years of business. The accounting software available on cloud can make it considerably easier to manage bills and finances.

Proactively controlling energy, water and paper usage is another way to bring down costs. Indeed, such environment-friendly practices should be encouraged at every stage of business growth.

2. Work on Your Supply Chain Management (SCM)

This is one area which can cause a significant variation in costs accrued by two enterprises in the same field. If you are unnecessarily paying to brokers and middlemen, the total expenses are bound to increase drastically. To make the supply chain more efficient, it is important to supervise all aspects of its management carefully. Reassess the process periodically and make sure that you combine operational excellence with strong analytical capabilities and data-driven, cross-functional decision making.

Streamline the ordering process and monitor customer demand patterns closely to make the necessary changes. Demands can change from season to season and month to month. You can also consider implementing just-in-time inventory management, where you order and receive inventory as and when needed. It lowers the inventory carrying fee, secures the business against write-downs attributable to the decrease in demand and helps to avoid overheads due to an excess of inventory.

Loan-Related Measures:

1. Look Beyond Interest Rate When You Apply for Business Loan

Once you decide to start a new branch for your venture or want to invest some funds in improving the existing premises, you will also need funds for the same. To keep the costs of borrowing minimum, most entrepreneurs prefer a low interest rate. This is not always a good option because loans also come with a processing fee and other charges. Banks and conventionally operating non-banking financial companies (NBFCs) may levy a compulsory insurance premium that gets included in the EMIs. Another extra charge comes in the form of prepayment penalty levied if the borrower pays off the outstanding debt before the end of the pre-determined schedule.

Digitally operating NBFCs, referred to as FinTech companies, have now become attractive alternatives for SMEs that prefer a hassle-free business loan application process along with a reduction of the costs to be paid for the loan. The average loan processing fee charged by most FinTechs is less than that of banks and other lenders. Furthermore, these new age digital lenders do not add any insurance premium instalment to the loan EMIs taken from the borrowers. If a borrower can afford to pay off the outstanding debt through one lump sum amount, she/he is allowed to do so at any time without any prepayment penalties. There is no stipulated ‘minimum loan period’ till which the repayment must be made in fixed monthly instalments.

To spend more time in the productive aspects of your business and avail a loan for its growth in the shortest time possible, it is advisable to apply business loan online. Almost all established financial institutions offer such digital facilities now. And when the loan is solicited from a FinTech, you can not only send the business loan application along with the soft copies of supporting documents online, but also get the decision on funds within minutes of initiating the process. Customised algorithms and a dedicated customer service team scrutinise the application, and once it is approved, the amount is credited to the bank account in 48 to 72 hours.

If you are making all practical endeavours to manage your business finances efficiently and are also on your way to expand the venture, a few strategic changes in internal operations and a deliberated decision on funding will bring the desired outcomes.