Gone is the credit cycle that saw a hard hit on the global economy past the COVID-19 pandemic. And in this new credit cycle, SME lending can make the most economically profitable contribution to NBFCs. Since the traditional banking system somehow is unable to create the right and useful lending solutions for their SME customers, most of them are turning to NBFCs for their unmet needs. As per a report by the World Bank, the unmet finance needs of the SME sector are nearly $5.2 trillion a year.
This opens up opportunities for other financial institutions to capitalize on SME-lending opportunities. They offer faster credit decisions, reduced interest rates, customized financing solutions like purchase order financing and bill discounting coupled with seamless customer experience, and minimum documentation, thus inclining SMEs to grab business loan opportunities from this sector rather than the banks.
They offer automated end-to-end lending services that significantly reduce the turnaround time. Moreover, they offer commercial loans at fewer interest rates since their own operating models are based on effective cost-reduction with the use of technology, and data integration that makes transaction matching, loan servicing, record maintenance, cashflow management, etc. streamlined and with minimum expenditure.
Coming to how a business loan can help in business expansion, there are a plethora of options to choose from and gain from them. Let’s have a brief insight.
#1. Adding more products and/or services to your basket:
A business loan can help you in expanding your product(s) and/or service(s) portfolio by providing funds for additional purchases. Some of them can be used to make more options available for the same customers or entirely target a new audience.
Before applying for a commercial loan for this purpose, you must do your homework well regarding the new inventory you are looking forward to investing in so that you can add relevant profitable options to your portfolio.
#2. Addition to your fleet of equipment:
A business loan can help you add more to your existing fleet of equipment. You can either purchase them new or buy them on a lease depending on your business requirements. Additional equipment means additional earning hands for your business. However, make sure that you invest in what’s in the demand. Else, you may not want your newly purchased piece to be sitting idle. Make it work, make it worth it!
#3. Adding your service space:
Well, if your business has walk-in customers or you are a service provider and want to hire more talented professionals, of course, you may need more working areas.
A commercial loan can help in expanding your office space. When you are in a service sector such as hospitality or retail, indeed your space makes a huge impact on your customers. A business loan can help you add an extra charm to your space.
In addition, it may also help your business meet the needs of newly hired employees until the time profits start drawing in.
#4. Merging with or acquiring another business:
Sometimes, business growth is achievable with mergers and expansions. This can help in expanding your customer base and also give a more accessible range of products and/or services to your existing customers.
And you definitely may not want to miss such an opportunity due to a lack of funds. A business loan can help in turning your aspirations into reality. Mergers are lucrative moves. However, ensure your financial planning to make the move a profitable one. It can also help you pay back the commercial loan well in time or even before that.