According to the U.S. Small Business Administration, the five-year survival rate of new businesses between 1994 and 2019 was only 48.9%.
Many factors contribute to business failure. A lack of resources, poorly planned marketing, a lack of market opportunity, and logistical product issues are four of the most devastating factors. You can minimize the risk of these four horsemen by investing in your business and increasing sales. But what if you don't have capital on hand? That's where a business Line of Credit (LOC) enters the picture…
What is a LOC?
A LOC is a more flexible version of a business credit card. When you need capital, you withdraw funds up to your credit limit. Then, you pay back your loan in low payments long-term. Taking out a credit line for your business from an online lender can help you:
- Get financing without having to jump through hoops with traditional lenders and credit unions
- Save on interest
- Get approved for financing in just three hours
- Weather storms as a business owner
In short, a LOC allows you to invest in business growth without the chains of a big bank holding you back.
6 Smart Ways to Invest Your LOC
I know what you're thinking: "I want to know how to use a line of credit to make money," or "what is the best way to use a line of credit?" Simply read on for 6 ways to use a business LOC to increase sales.
1. Invest in Social Media Marketing
Social media is one of the best ways to find new customers and increase sales. The global penetration rate for social media is 58.4%, and there are over 4.7 billion social media users. GravaStar, a company that produces audio products, is a fantastic example of what the power of social media can do. GravaStar used sponsored Instagram reels to showcase its unique audio collectibles between May 19th and June 1st, 2022. During this period, the brand increased its Return on Ad Spend (ROAS) by 78% and decreased its Cost Per Conversion (CPC) by 35%.
2. Introduce New Products
New products and ideas can make or break a small business. Let's take Vessi as an example. Vessi started with a Kickstarter campaign that raised over $1 million. Their idea? Waterproof shoes. Vessi invested heavily in its product, and as a result, it became a global brand in under five years. A similarly enthusiastic investment in your product could help you achieve similar success.
3. Organize Promotional Events
Promotional events aren't exactly cheap. Depending on your resources, you could expect to pay $5,000 to $15,000 for a small-scale event with less than one hundred people. Event vendors also require upfront deposits and payments, which is something that's tricky with limited capital. A LOC gives you the capital to invest in events that will drive sales increases.
4. Employ Business Development Consultants
Business development consultants can improve your business by offering expert advice on anything from marketing to digital infrastructure to customer service. That expert advice isn't cheap, however. According to Mario Peshev, a well-known consultant, consultants often charge a $150 to $300 hourly rate, plus retainer fees. Most consultants require at least 10 hours of work to really understand your business and make recommendations. That's expensive! But using a LOC will help you foot the bill.
5. Invest in Digital Infrastructure
Would you buy something from a company with an updated, hard-to-use website? Many consumers wouldn't, so if your website is old, it's likely costing you sales. Using a LOC gives you the capital to invest in a website with a strong UX. You can also invest in other digital infrastructures like:
- A Customer Relationship Management (CRM) tool
- Customer service tools like a chatbot, knowledge base, and phone and email support
- Sales automation tools
- Email marketing tools
- A blog
- New projects
6. Invest in Current Customers
Want to know how to grow your sales long-term? Research from Bain and Company shows that increasing customer retention by 5% can increase profits by 25% or more. From giving out free promotional items to offering free shipping to providing a smooth online ordering experience, there are many ways to improve your customers' journey. Of course, these strategies require capital. A LOC can help with that.
Need a Business Credit Line? Idea Financial Can Help
A business loan can help you grow credit, increase cash flow, and jumpstart that sales increase. And if you want a business LOC, Idea Financial can help. We offer loans of up to $250K with 9- to 36-month terms. With Idea Financial, you:
- Control what you draw and pay
- Can make repayments early without penalty
- Get a same-day decision and next-day funding
- Pay minimal interest rates