Small businesses often require capital at various stages like when starting a new project, business expansions, or even if they are trying to recover from losses. However, when a business is just starting up, it may be difficult to get funding. While large enterprises tend to have easy access to capital, entrepreneurs handling small businesses have to figure out ways to make the most of the available resources in every way that they can. But, for small businesses to compete with large institutions, this may not be enough. This is when alternative ways of funding a small business come into play. One of the suitable financing options that small businesses can explore is a business loan.

Historically, acquiring a business loan from a bank was only possible for very few businesses. However, this is slowly changing in India as SMEs see encouragement through various government policies and financing schemes. Banks are starting to realise the unique potential offered by small and micro-businesses in the country. Business loans can help small businesses in many ways like financing new equipment, purchasing inventory, and even funding expansion plans. Some of the ways in which a small business can use business loans to compete against large enterprises are explained below.

• Business growth

Every business needs the right amount of finance, skilled manpower, and technological boost for its growth. Among all these, finance is the most crucial since it facilitates the business to meet all the other needs. Thus, the cash flow of a business can be a crucial element in determining whether it can expand its operations to compete with larger organisations. A small business can arrange an alternate facility or invest in the required equipment to boost the business operations. Additionally, with business loans, business owners can also have the freedom to use the funds as per the needs of the business.

• The flexibility of business loans

Small businesses that lack finances can choose from various types of business loans to fulfil specific business requirements and become capable of competing against large businesses. There are multiple government financing schemes specifically designed and offered by MSME Business loan. These can be used for starting, expanding, or upgrading a business. Most government financing schemes do not require the business to provide any security or third-party guarantee. With easy financing, small businesses can quickly scale up and compete against large enterprises.

• Economies of scale

While large businesses have the default advantage of economies of scale and easy cash flows, small businesses have the advantage of a lower cost structure. This benefit mainly comes from the lower overhead costs compared to large businesses that suffer from large-scale overheads such as higher salaries, infrastructure investments and financing of facilities, etc. Small businesses can make the most of business loans to quickly gain economies of scale while still benefiting from a lower cost structure. 

• Streamlining operations

Since small businesses have less rigid and formal business structures, they are often in a better position to take immediate decisions and easily implement them as compared to large organisations. By taking business loans and quicker decision making on streamlining of operations, small businesses can gain an advantage over large organisations.

Whether it is streamlining processes or even automating workflows, small businesses can make decision making quicker to add efficiency to their operations. Business loans offer an additional boost by making the right amount of finances available for easy implementation of decisions.

• Boost social media presence

In today’s digital age, small businesses can make their presence felt by being active on social media. This may require additional funds and business loans can come in handy for such requirements. 

• Hiring the best talent

It is often difficult for small businesses to attract the right talent due to monetary constraints. Large enterprises tend to attract better talent due to the monetary offerings and added facilities. 

However, small businesses can also be professionally run with good corporate practices.

Why are small businesses important?

Small businesses are important for many reasons – job creation, exports, innovation – but perhaps their biggest impact is on their local communities. Leslie Hassler, a small business scaling strategist, explained how successful small businesses leverage their resources within their communities.

Conclusion

Small businesses have many advantages over larger companies. This will help in the survival and long-term growth of small enterprises.