All businesses must have a goal to make a profit or profit maximization. One way to increase profits is by developing a business. The business must sell more products or services to more customers too. But often a business, especially Small and Medium Enterprises (SMEs), does not have this capability.
The availability of capital is certainly an important factor in business development. Additional venture capital can be obtained internally or externally. Internally, additional capital can be obtained from business profits, provided the profit must be large enough so that it can be played back. Externally, some ways to get additional capital include selling shares (equity) or with a business loan. Getting a business loan can be one way to develop a business because of the benefits.
Then what are the advantages in using business loans in developing a business?
Avoiding Lost Opportunity
Often an SME in running its business suddenly gets a demand for products / services with a number that is much higher than usual. Factors can vary, from the rising trend in certain industries, to the success of promotional activities carried out. Usually SMEs have difficulty serving this rising demand due to limited production capacity.
For SMEs that sell their own products, they need to increase production capacity by adding production machines and possibly adding employees. For SMEs that sell services, such as digital advertising services (online ads), they need additional capital to cover the costs of advertising in advance before they can be paid by their clients.
By taking a short-term business loan, they can get additional business capital to buy additional machines or to cover the costs of digital advertising, like the example above. With this, SMEs will avoid the Lost Opportunity side, namely the loss of opportunity due to not having additional capital. Reducing lost opportunity with a loan can be one way to develop a business.
Maintaining Business Ownership
One way to get additional capital besides loans is to sell a portion of ownership in the form of shares (equity). This method can indeed be used, but business owners must also be prepared to lose some ownership and some control of their business.
New shareholders / partners will enjoy the results of the hard work of business owners and they may also participate in business operations so that business owners are not as free as they once were in running their businesses.
In contrast to business loans, where the business owner still has 100% control over his business. Business owners only need to pay back business loans well. With a realistic business loan value, according to the ability to pay, business loans should be paid on time and company control remains in the hands of the business owner.
Business actors need to expand if they want to develop their own business and increase profits. Expansion can be in several ways, both in adding branches, or adding products / services. If a business requires a physical store, such as a laundry business, for example, the business actor can add branches and also add his laundry machine.
Another way to expand is to add product lines to be able to serve customers from different segments. Examples of adding a product line, for example, a bakery that usually sells brown bread, then adds a variety of flavors by selling cheese bread. Of course there is the addition of cheese raw materials that did not exist before, and this requires additional capital.
One important factor in expansion is time. The faster a business expands, the greater the probability that the business will get a dominant market share, thus slowing down the rate of competitors who have the potential to take the market that we are after. The speed of expansion certainly needs to be supported by strong business capital, and business loans can be used to support this business expansion.
By ensuring accurate profit projection from the expansion results and applying for a loan in accordance with the ability to pay, business loans can be one way to develop a business that can be done.
Using Peer-to-Peer Lending Loans as a Way to Grow a Business
Previously, business actors could only borrow from conventional financial institutions such as banks, so now there are more choices. One option to get a business loan that is relatively easy is to apply for a loan from a Peer-to-Peer Lending (P2P Lending) Financial Technology (Fintech) company.
One of the most trusted P2P Lending companies in Indonesia is Good Lenders, which has been registered and overseen by the Financial Services Authority (OJK). The main advantage is that SMEs do not need to use fixed assets (land & buildings) as collateral (as usually requested by banks).
SMEs can simply use the invoice / PO / SPK / contract that has been obtained as collateral. The flowers are quite competitive, around 18% -21% effective per year. Another fee is the origination fee which is quite low and flexible, which is 0.25% per month.
If we take the example, an SME with a margin of 25% and already has an invoice from its client can apply for a business loan to Acceleration and can get a loan of up to 80% of the invoice value. If the invoice will be paid within 3 months, then SMEs can borrow with a tenor of 4 months so that there is a buffer until they are paid, with the principal payment at the end of the tenor (only interest is paid every month).