Can I scale up my business with a personal loan?

Personal Finance · 06 Mar 2020

Figures from the Australian Taxation Office (ATO) reveal that more than 60% of businesses in Australia close within three years.

Figures from the Australian Taxation Office (ATO) reveal that more than 60% of businesses in Australia close within three years.

If that statistic is a bit sobering, the good news is that after that point, while it's not always plain sailing it does becomes a bit easier. Your business name is established, you should have regular clients and you have a better understanding of your work practices.

Whether you’re trying to keep your business in good health no matter what stage it’s at, or want to scale up your business and its income, there are lots of ways you could put a business loan to good use.

Move premises

Moving location isn't the answer for everyone – a cafe may work in one spot but not in another, and office space rarely propels a company forward – but if you need somewhere a bit bigger to work from, moving could be a great step.

Whether it's a larger restaurant (or one on a busier street), a warehouse with more space or somewhere a bit more modern, having the money to cover the rent for a little while can help make the transition smoother.

Hire staff

Many businesses are limited in how much work they can do by how many people they have to do the work.

If you can afford to put on an extra mechanic, you can fix more cars. If you can hire a specialist, you can grow in a different direction. Even if you just hire someone to take over some of your work, you can spend more time on executive decisions that can push your business forward.

There are other ways to improve your workforce without adding more personnel.

Even if you already have a good team of workers, sending them on training courses to upskill could be a great value investment in your business. Likewise, you may have good individual workers but a lack of team spirit, in which case a team-bonding exercise may help your staff come together.

Hire contractors

There are so many aspects to running a business that it's unlikely you'll have all the skills you need in-house. When you look at the costs involved in being a one-stop shop, it can be hard to justify employing so many specialists.

Paying contractors to do work for you is a great way to get expertise on your side without having to pay full-time wages. Whether it's something core to your business like a bookkeeper (again, freeing up your own time to be more productive) or a specialist like a marketing agency, working with outside help could give your business the push it needs.

Buy equipment

Whether you cut down trees, dig holes or build homes, there are a lot of businesses out there that depend on good machinery. If your tools are getting a bit long in the tooth or you've just got your eye on something a touch better, having the funds to buy equipment now could give you the edge on your competition.

Some businesses can also change their focus with new technology. Arborists may be able to cut down branches, but without a stump grinder, they won't be able to take on bigger jobs. Likewise, a lawn mowing business can easily upsell a hedge trimming service once they've got their foot in the door.

For office-based businesses, it might be more about upgrading computers to make sure your staff are happy and working with the best tools available.

Open a second location

We talked about moving somewhere bigger, but what if instead of moving, you were duplicating? Whether you're going to a new city or just a new suburb, there's a lot involved in opening up a new venture.

Opening a second location has lots of costs associated with it – new premises, more staff, more machinery and more admin – essentially everything on this list. However, if things go well, the benefits are huge.

Buy a rival

It's hard work to set up a second location, even if you've done it before. Sometimes, it's easier to buy a business that's already been set up. What's more, if you buy a competitor's business, you'll instantly grow your market share and have one less rival to worry about.

Of course, with any business transaction, it's important to do your due diligence and make sure that what you're buying offers good value for money.

Did you know …?

Harmoney business loans are different from some other small business loans. They work in a similar way to a personal loan in that they are taken out by you personally, as the business owner, rather than by the business itself, but can be used by you for business purposes.

As a responsible lender we will also need to establish that your business is earning sufficient income to be able to afford the loan as well as paying you a sufficient income to live on and meet your other financial commitments. It means you may have to supply additional information compared to a personal loan taken out for other reasons, or to a small business loan with a bank lender.

However, if you meet the lending criteria, you will still be eligible to borrow from $2,000 to $70,000 without the need to provide security, at a rate set to your circumstances.

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