RUNNING a small business often feels like juggling while walking on a tightrope — it’s a balancing act that can risk everything with one wrong step. There’s constant pressure to grow and keep up with demand, but the reality is that cash flow is tight, and every decision has to be weighed carefully.
One day you’re thinking about how to expand, and the next, you’re hit with the challenge of acquiring the tools you need to keep things running smoothly. However, the upfront costs are huge, and for many medium, small and micro enterprises (MSMEs), it can seem like an impossible feat.
A study by the Asian Development Bank shows that over 60 percent of MSMEs in the Philippines struggle with access to financing, which makes growth harder to achieve. The good news is that smart financing decisions can help you get the tools you need without putting your business at risk. Here are four things to keep in mind when financing essential tools for your business.
Choose loans specifically designed for business tools
One of the first things to realize is that not all loans are the same. It’s tempting to go for quick cash loans, but these often don’t offer the best terms for buying vehicles or equipment that your business needs. What you want is a loan specifically designed for the tools you’re acquiring. Why? Because these loans are tailored to the purchase at hand, often with better interest rates, longer repayment periods, and conditions that are structured to align with your business’ cash flow.
Specialized loans mean you get terms that are more manageable and suited to the specific needs of your business. This way, you’re not just getting the funds — you’re getting the right financial support to help your business thrive.
Look for flexible payment terms that align with your cash flow
Anyone who runs a business knows that cash flow doesn’t follow a straight line. It fluctuates — sometimes dramatically — depending on the season, market conditions, or unexpected changes. If you’re locked in to rigid loan payments that don’t account for the ebb and flow of your business, you might find yourself struggling during slow months.
That’s why it’s essential to look for loans that offer flexible payment terms. Get a loan that allows you to adjust your repayments based on how your business is performing that month. This flexibility can take a lot of stress off your shoulders, allowing you to focus on what really matters — running and growing your business, instead of worrying about making payments during a dip in revenue.
Compare interest rates to minimize costs
Interest rates matter, and they can either make or break the affordability of a loan. Don’t rush into the first loan offer you get. The difference between a slightly lower and a slightly higher rate can translate to a significant amount of money over the course of a loan.
Unfortunately, many MSMEs are deterred from seeking loans due to high interest rates. But here’s the thing: interest rates vary from lender to lender, and taking the time to shop around and compare rates can save you a substantial amount in the long run. Lower rates mean smaller monthly payments, which leaves more money in your pocket to reinvest in your business.
Think about financing for upgrades, not just new purchases
When people think about financing, they often imagine buying brand-new tools or equipment. But what about the things you already own? Sometimes, upgrading your existing tools or acquiring pre-owned ones may be more sensible than purchasing something brand-new.
Financing upgrades can be a smart way to improve your business’ efficiency without taking on the financial burden of buying entirely new equipment. This applies to devices, machinery, or vehicles needed to keep operations at optimal levels.
Ultimately, investing in the growth of your MSME is a crucial step, but it doesn’t need to put a strain on your cash flow. It’s a good thing there’s a bevy of financing options available in the market today.
At SB Finance, for instance, we understand the unique challenges MSMEs face, which is why we’ve developed a growing selection of financing solutions that cater specifically to those needs.
But before jumping on that decision, and making that first big step to invest in growth, keep in mind to choose loans tailored to your needs, seek flexible payment terms, compare interest rates, and consider strategic upgrades.
At the end of the day, every business owner wants to cultivate the enterprise that they have invested so much on, but each has a unique set of requirements, so learn to clearly define your own needs, and make full use of the options available.
Abigail Dans-Casanova is president and CEO of SB Finance, a Security Bank and Krungsri partnership that is regulated by the Securities & Exchange Commission and supervised by the Bangko Sentral ng Pilipinas. Classified as a non-bank financial institution, it aims to enrich lives as it envisions to be the Philippines’ preferred financial service provider.
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