Advertiser Disclosure

7 Strategies To Spend Your Small Business Loan Effectively

Written by Banks Editorial Team

Updated April 22, 2021​

4 min. read​

Knowing how to spend your small business loan capital is as important as getting approved for it. You have worked hard to start your business and getting funded which means you can take your dream to the next level.

Before you start spending your newly acquired capital, you need a strategy to make sure that money is spent wisely and effectively. Not sure where to start? The following strategies will help.

Loading... Loading...

How to Spend Your Small Business Loan

1. Plan your Spending Meticulously

First and foremost, you need a plan for how you’ll spend your business loan. Having a plan (and sticking to it) is the only way to budget your expenses, stay on track, and make your capital last as long as possible.

Statistics show that the majority of small businesses use their loans to buy inventory and equipment. This makes sense since many small businesses are using loans to get started. Established businesses also use loan capital to buy inventory to manage seasonal fluctuations and test new products.

Prioritize your business needs first and then create a strategy around those needs. If you’re just starting out, your priorities will likely include getting inventory and equipment and possibly even hiring contractors until you have a full in-house team.

If you’ve been in business for a while, your priorities will be different, but you still need to plan your expenses.

2. Plan How You Will Repay Your Loan

Whether you’ve been approved for a loan or you’re still waiting for a decision, it’s crucial to plan how you’ll repay your loan. For example, if you take out a short-term loan, you’ll need to make more frequent payments than some other types of loans.

Your loan repayments should be scheduled into your business “to-do” lists and marked on your calendar. You don’t want to miss even a single payment, as missing a payment due date could increase the amount of interest and fees you’ll be required to pay.

3. Revise Your Business Plan According To The Capital You Receive

Depending on the type of loan you received, you may have been required to provide a solid business plan as part of the approval process. If so, make sure you stick to that plan. If you were approved for an amount that differs from what’s in your business plan, revisit your business plan to accommodate the amount of capital you received.

Experts agree that businesses should continually revisit and revise their business plan and make thorough annual updates. Receiving more or less funding than you anticipated is a huge deal and is a critical reason to revamp your business plan.

Be prepared to consult a professional to revise your business plan. Ideally, you should connect with the person who created your original business plan since they’re already familiar with the details.

Loading... Loading...

4. Require Approval for All Expenses No Matter How Small

One of the best ways to keep a tight grip on your loan funding is to require approval for all expenses no matter how small. Many organizations allow certain employees to make purchases without approval under a specified dollar amount. Not requiring approval for small purchases helps employees do their job efficiently, but it can also create overspending.

For example, say your threshold for expense approval is $100. Any purchase $100 or under can be made freely without approval. This sounds reasonable since some team members need to make small purchases to get their work done. However, small purchases can add up fast. For instance, your in-house marketing team could easily spend several thousand dollars on multiple $100 purchases.

Just ten of these $100 purchases amount to $1,000 of unexpected expenses. One department can easily spend that much money in one month. When your company has multiple departments that make small purchases, you could easily see $10,000 in unexpected expenses fly out the window.

For example, your web marketing team might buy WordPress themes, add-ons, random software subscriptions, customized web scripts, stock photos, and other digital necessities.

If all purchases are required to go through an approval process, when you receive a request you can look for cheaper alternatives and determine whether those purchases are a priority (or not). For example, your web marketing manager might not know your web developer has a repository of free open source software that does everything you need.

5. Calculate Your Monetary Needs Before Applying

When you’re just launching your business, you know you need to spend money on equipment, payroll, inventory, software, marketing, and other common expenses. However, it’s important to calculate your expenses to the penny before spending any money.

For example, you know you need a website, but don’t just designate a chunk of your budget to website costs and then try to work within that budget. Chances are, you’ll either set your budget too high and spend unnecessary money, or you’ll set your budget too low and get frustrated when you can’t get the website you need.

Before creating a budget, do your research to find out what you need and how much those needs cost. For instance, if all you need to get started is a simple website with three pages, you can build it yourself for free and pay less than $150 per year for shared hosting. Once your business grows and your needs expand, you can hire a professional developer to meet those specific needs.

Loading... Loading...

6. Do Not Buy Top-of-the-Line Equipment Unless Absolutely Necessary

It’s tempting to buy the best tech equipment on the market, but buying new tech is like buying a new car – it becomes outdated fast. Today’s top-of-the-line tech will be old news in six months, replaced by something faster and more efficient. Your business may not need the fastest and most efficient tech on the market.

The only time you should spend your loan money on the latest tech equipment is if your business actually requires the specifications that equipment has to offer. For instance, if your company can’t function without the fastest network speeds and high bandwidth, it makes sense to buy top-of-the-line networking components. If you’re running a small office with less than ten people and you don’t need lightning fast speeds, you can function perfectly well with older networking equipment.

7. Get An Expert Opinion On Your Business Priorities

Prioritizing business expenses isn’t always easy, especially when you’re starting your first business. Even some experienced business owners struggle to prioritize expenses.

Seek outside help from an expert to prioritize how your loan capital should be spent. You don’t need to follow every suggestion, but someone outside of your business might make some points you haven’t considered that will save you big bucks.

Apply For A Small Business Loan

If you’re looking for capital for your small business, we can help match you with the right lender and you can apply completely online.

Applying for a small business loan online with us is fast and easy. Unlike applying for loans with paper applications where you need to submit one application per lender, with, submitting one application allows you to compare offers from multiple lenders. Once you know what different lenders can offer you, it’s easy to choose the offer with terms that are right for you.

Loading... Loading...

Advertisement Disclosure

Product name, logo, brands, and other trademarks featured or referred to within are the property of their respective trademark holders. This site may be compensated through third party advertisers. The offers that may appear on’s website are from companies from which may receive compensation. This compensation may influence the selection, appearance, and order of appearance of the offers listed on the website. However, this compensation also facilitates the provision by of certain services to you at no charge. The website does not include all financial services companies or all of their available product and service offerings.