Applying for A Loan to Cover Business Advertising Expenses – Is It A Good Idea?
As the old saying goes, one needs to spend money to make money. Even though some people believe this is not true, financial resources are the fuel that propels businesses to the top. Almost 50% of all small companies in the United States spend less than $10,000 of their budget on marketing. On the other hand, around 70% of company owners stated that they would like to invest more in advertising to grow their customer base. When asked why they don’t invest in marketing, entrepreneurs stated that they don’t possess enough financial resources to do so.
Even though applying for loans is often considered a practice that can negatively affect the financial situation of a business, the truth is that the money received can help companies flourish rapidly. The business can expand its customer base, thus gaining more profit in the future. The amount of money a firm has to repay will be infinitesimal compared to the earnings. This article will list all the advantages of obtaining a business loan and investing the money in advertising and other marketing strategies that may boost the profit of a company. Keep reading to learn more about it.
Developing a marketing strategy
Advertising is only a small part of the marketing strategy that one has to put together for a company. Yet advertising might cost the most in this process, which means it is highly important to define the purposes of the marketing strategy, as well as to mention all the key components of this strategy and how much they would cost to implement. Without developing a marketing strategy first and determining the costs, business owners wouldn’t know what amount of money to borrow. Borrowing too much means repaying the debt in a longer period of time, which can be inconvenient for some. The marketing strategy should include details related to:
· Identify the company’s target audience and competitors. This process involves targeting the people that may be receptive to the business’ marketing activities. At the same time, the competitors must be identified and their own marketing activities have to be reviewed and analyzed. This is the research phase and it will involve small to medium costs. During this stage, the best marketing practices for the company should be selected.
· On-page optimization costs. SEO is paramount when investing in online marketing because it helps people reach the company’s website and social media profiles, which can turn them into leads. Paying an SEO expert to deal with keyword research, guest posting, links, Metadata and other technical things that are difficult to tackle should be part of the marketing strategy.
· Content creation costs. The purpose of content creation is to inform the customers of a company and to keep them coming back to the website.
In order to transform existent customers into loyal ones, entrepreneurs have to invest in various ways of actively engaging them. Content must also be updated constantly to respect the trends of the moment.
· Social media advertising costs. Paid advertising campaigns on social media websites became quite expensive, and business owners have to invest money constantly so that they are effective. Setting a budget especially for this purpose is an absolute necessity to keep the customers coming.
· Physical advertising costs. Marketing isn’t limited to online practices. Creating banners, flyers, business cards, and other stationery products that are used in putting together a strong brand also enters in the category of marketing costs, that must be covered one way or another.
· Email marketing costs. Email marketing campaigns are still used quite often to let people know about offers and deals. These also require a monthly budget, but they are highly efficient and they can increase the number of customers tremendously.
Loan conditions and requirements
Put simply, businesses need a serious marketing budget and entrepreneurs often don’t have the financial resources to establish this budget on a monthly basis. Some companies are not popular because not enough money was invested in marketing. Advertising is the only method to reach more people, and it has to be done the smart way. Applying for a loan to obtain the needed money for this operation is a good idea as long as you have a well-defined marketing strategy and advertising plan. Once decided that a loan is the best option to cover these expenses, business owners have to learn more about the requirements they need to meet to apply for one.
Most companies require a minimum amount of credit/debit card sales, but this is not a general criterion. Financiers choose their own threshold before lending money to an entrepreneur, so you need to get informed about these first. Researching the potential lenders where you can get the money from is a condition that entrepreneurs have to respect at all costs. Making informed financial decisions can save a business from paying too much money on loans. Platforms such as LoanStar.com can help any person choose between thousands of financial service providers all around the world.
Another factor that may influence obtaining a loan or not refers to cash flow. The debt-to-income ratio is essential when applying for a loan. If the ratio is positive, a business owner has higher chances of obtaining the loan more rapidly. The age of a company determines how difficult the process is with most financial service providers. New businesses and start-ups have a hard time when it comes to getting funding because a common condition of applying for a business loan is to have a track record of two years minimum. The loan approval process is sometimes delayed because of the type of business. Some industries involve financial risks that financial lenders are not willing to take very often. The FICO credit score is a criterion that is adopted by most lenders. A score of 700+ will guarantee loan approval, while poorer credit score can slow down the process. A bad credit score can be an obstacle in the way of obtaining a loan, but there are some lenders that overlook it in certain cases. Again, researching is the only way to choose the best financial lender for your situation.