If you’re like many online business owners, you dream of receiving a chunk of money to fuel your success. But, the question is what do you really do with an infusion of cash? With the economy gaining traction and more opportunities for obtaining a loan or a business cash advance than ever before including First American Merchant, peer-to-peer lending, and crowdfunding, business owners definitely have the ability to obtain funding.

How borrowed money is used can literally make or break your business. Spent wisely, it can be the key to generating more profits and taking operations to the next level. But, funds can also be recklessly squandered on fruitless marketing efforts, unnecessary equipment, or other profit-draining expenses that can turn your brilliant business idea into a downright flop.

Before you apply for a business cash advance or a business loan, it’s wise to first devise a plan for how you will use the money.  Consider that most businesses will require funding at some point or another for at least one of these expenses:

  • Equipment
  • Inventory
  • Expansion

Equipment
Could a new computer, printer, or sewing machine simplify your operations or speed up your production time? Funds to pay for the purchase of such necessary equipment could increase your profits.  Equipment financing can often be acquired quickly and can often be repaid over the course of months or years. In some cases, it may be even more beneficial to spend only a small portion of a business cash advance or loan on a monthly lease for equipment. Weigh your options carefully, and crunch the numbers before you invest.

Inventory
One of the most common uses for a business cash advance is inventory. Simply put, it takes goods in stock to make a profit. So, it only makes sense to invest in enough inventory so that you consistently have enough on hand to sell to customers. With that said, it’s a common mistake for business owners to purchase too much inventory. And, if a product fails to sell, you could potentially be on the hook for some major debt.

Before you invest any borrowed money in inventory, you’ll want a very well thought out plan for how you’re going to sell your products. This should include a close evaluation of the cost of goods, production lead time, shipping costs, and marketing strategies.

Expansion
Maybe you’re already enjoying some success with your business but want to take it to the next level. A surge of cash might be exactly what you need to get it off the ground. When you’re in expansion mode, you will want to return to your business plan and carefully plot out how you can create growth and what it will cost. If you play your cards right, your expanded enterprise should generate enough profit to easily repay a lender.

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