Improving the cash flow of your engineering business helps keep operations on track and avoids delays that can culminate into losses. Start by identifying the categories that require better cash flow management, and then plan on the best way to arrange for funds. You can make use of customised loans for engineers, which offer you a high loan amount for your engineering business, easy eligibility and fast online application alongside a nominal rate of interest.
Take a look at 5 ways in which you can improve your business’ cash flow when you take an engineer loan.
1. To pay vendors
Depending on the kind of engineering business you are in, you could have to pay vendors for various supplies. For example, if you are chemical engineer with a soap and detergent manufacturing unit, you might have to pay potassium hydroxide, alkali, fragrance and talc vendors 30 days after you take delivery. But, if you’re not generating income within this period, you will find it difficult to make such payments. By consistently paying late, you run the risk of the vendor reducing your payment period, which will only make matters more difficult going forward.
In such a case, you can use an engineer loan to pay your vendors. If you have a varying payment schedule with each vendor, you can also make use of a Bajaj Finserv’s Engineer Loan that offers flexi loan. Here, you can borrow against the sanctioned loan amount as and when you need to make a payment. Here, you only have to pay interest on the sum that you use. Suppose you borrow 20% of the total amount first and then borrow 40% in a few months, you will only pay interest on the 60% of the loan amount that you have used. The rest of the amount is available to you and will only be subject to interest payment as and when you use it. To further reduce your outflow, you can opt for interest-only EMIs and repay the principal at the end of the tenor, once you receive payments from your customers.
2. To pay wages
Be it your production managers, factory workers or floor in-charges, it is important to pay all your employees on time. If your business is going through a lean period or if you’re not yet making profits, you might find it difficult to do this month on month. Delaying the payment of salaries can cause demotivation amongst your workforce, give you a bad reputation and can cause employees to quit, which can significantly impact your output. As payroll costs are both regular and sizeable and so, you can use the large loan amount of an engineer loan. This way you can keep employees happy and ensure that your business operations are on track.
3. To manage inventory costs
If you are a chemical engineer with a soap manufacturing business, for example, you will need to shift all your soap inventory to a storage area until are ready to dispatch them to your distributors and vendors. While too much inventory will lead to your money being blocked in the stock of soaps, you will need to maintain some amount of inventory to ensure a quick turnaround time to fulfil demand. For this, you will need a clean, odourless room. You will also have to invest in systems that maintain the right temperature and humidity to stop the soaps from getting spoilt. Your storage facility will also need a packing and loading dock. Besides, you will also need to equip the area with CCTV cameras and invest in inventory management software. All these aspects require finance. Using an engineer loan will allow you to preserve your stock until the demand rises again or until it is time to dispatch the soaps. If you don’t invest in this, the money spent on manufacturing soaps will go waste.
4. To pay overhead costs
Overhead costs include the rent of your office, electricity bill, phone bill, cost of hiring machinery, routine maintenance and more. These costs need to be paid on a timely basis to prevent problems that can disrupt production and affect profits. In case you are facing a cash deficit, these costs will be difficult to pay. But, an engineering loan with its flexible financing can help you pay for these monthly expenses and keep hurdles at bay, while leaving your cash flow healthy.
5. To consolidate debts
Let’s assume that you had taken one loan to for a new manufacturing unit in order to boost sales and profit margins. Besides this, you also realised that you get most of your orders from Bengal, so it would be practical to set up a manufacturing unit there as well. You would be able to meet orders quicker and reduce transportation costs. To meet both needs, you took two loans in a span of 5 years. Besides this, you also make a lot of expenses on your company credit card, especially for work-related travel. Over time, the interest payments on these debts can accumulate and become overwhelming to repay. In such a situation, you can always opt for a reasonable loan to consolidate your debts at a better engineer loan interest rate and repay them with ease.
Avail an engineering loan to tackle your business’ cash flow problems without a worry. Once you improve your cash flow, you can use the available funds to invest in systems and processes that result in better profitability.