7 Smart Ways to Use a ₹10 Lakh Business Loan Effectively

A timely Business Loan can help you fund various business needs conveniently such as expanding infrastructure, purchasing equipment, financing technological upgrades, and even topping up working capital.

A ₹10 Lakh Business Loan is often adequate to finance various medium to small business needs. But the real impact of such funding always depends on whether or not you put it to good use.

In this guide, we'll discuss seven practical and outcome-oriented methods of using a ₹10 Lakh Business Loan. Read on to know more!

How to Use a ₹10 Lakh Business Loan Effectively

Here are seven ways to smartly use a ₹10 Lakh Business Loan to grow your business and manage your business finances better:

1. Modernise or Automate Operations

Inefficient processes and manual methods often slow down productivity and drive up the cost of business operations. Here is how it benefits you when you use the fund from a Business Loan to modernise and automate operations:

you when you use the fund from a Business Loan to modernise and automate operations:

• Automation software, equipment, or machinery helps you reduce redundant work and boost productivity.
• Installing automatic or semi-automatic machines in a manufacturing company helps accelerate production and improve production quality.
• Service businesses can invest their funds in purchasing CRM software, automatic billing software, or project management software.

2. Bulk Inventory Purchase for Improved Margins

Purchasing raw material or finished products in small quantities involves a greater per-unit cost. Bulk inventory not only reduces the cost of buying but also increases the profit margin.

• Use some portion of the ₹10 Lakh Business Loan to purchase inventory ahead of time when there are supplier offers or seasonal discounts.
• For example, a shopkeeper can purchase their best-selling products in advance at a discounted rate to stock up for meeting the higher demand during the festive season.
• Leverage price advantage using economies of scale by increasing volume of purchases.

3. Expand and Sell to a New Geographic Locations

Expanding your business to new and unpenetrated markets helps you expand your customer base. It creates multiple revenue streams that reduce dependence on one market and fuel rapid business growth.

• New Physical Location: Open a new store in a different market or neighbourhood, where there is a high demand for your products.
• Online Growth: Develop or create your online store, invest in marketing online, or become a high-traffic marketplace seller.
• Franchise or Partner Models: Invest in franchise fees, setups, and training to expand quickly.

4. Improve Your Marketing and Branding Initiatives

Even the best businesses can fail in the absence of adequate marketing initiatives. Marketing makes you visible to new customers, whereas branding helps build trust. A ₹10 Lakh Business Loan can help fund better marketing initiative to improve brand recognition and scale growth.

• Run digital marketing campaigns on platforms such as Google Ads, Facebook, or Instagram to drive lead generation.
• Rebrand your business with a corporate site, new logo, and packaging design to appeal to a high-end user base.
• Invest in content marketing, influencer marketing, or video ads to improve brand recall and increase engagement.
• Measure every rupee spent on advertising using analytics tools. Scale winning campaigns and shut down losing ones.

5. Enhance Working Capital Management

Working capital not only helps you ensure smooth daily operations but also meet short-term objectives. Managing working capital is still one of the biggest challenges that a company faces.

• Use the funds from a ₹10 Lakh Business Loan for recurring business expenses such as wages, utility bills, or payments to vendors when cash flow is low for an extended period.
• Utilise the funds for intensified procurement to meet high seasonal demands.
• Use the funds from your Business Loan to cover expenses during payment delays.

6. Invest in Employee Skills and Retention

Employees are the cornerstone of every successful business. To improve their productivity and your business's outcome, you must invest in employee growth. It not only helps you improve overall productivity but business growth as well.

• Provide sponsorship for training courses, workshops, or certification to build employee skills.
• Provide incentives or rewards based on performance to motivate and retain the top performers in your organisation.
• Enhance the work environment with ergonomic workstations, improved equipment, or employee wellness programs.

7. Diversify Your Product or Service Line

Diversifying your product or service offerings with a ₹10 Lakh Business Loan can lower the dangers of depending solely on one product. It also helps you open up additional revenue streams. Introducing new products can help in tapping new sources of revenue.

• Invest some part of the loan amount in R&D, prototyping, or product testing prior to launch.
• Offer complementary products that are likely to be purchased by existing customers.
• Investigate seasonal or premium product lines with greater profit margin to increase profitability.

How to Create an Action Plan Before Spending the Loan

Having access to a ₹10 Lakh Business Loan can be encouraging, but splurging without a well-planned strategy is not recommended. An action plan helps you figure out where you should put your money and channel every rupee towards goals with measurable returns. Here are some ways you can develop a strong action plan:

1. Set Clear Goals

Start by clearly describing your objective or goals you want to achieve. Is the goal a boost in sales, improved productivity, or cash flow accumulation? Specific goals are to avoid wastage and ensure that investments are aligned with business objectives.

2. Divide the Loan into Portions

Rather than seeing the ₹10 Lakh loan for business as one huge lump sum, break it down into multiple categories like operations, marketing, equipment, or contingency. This keeps everything in line and prevents overspending in one area.

3. Make a Spending Timeline

Plan when you're going to invest and when you anticipate getting returns. If there's a marketing campaign you've thought out, execute it during your peak selling season so that you have the greatest impact. When replacing equipment, coordinate it with production schedules so you don't waste downtime.

4. Track and Review

Establish a simple tracking system, like a spreadsheet or accounting package, so you can see how much is being spent of the loan amount, where it is being spent, and what results it is producing. Tracking progress on a regular basis helps you fine-tune before tiny issues become expensive blunders.

Tips to Maximise ₹10 Lakh Business Loan Effectiveness

Getting a ₹10 Lakh Business Loan is only the beginning; until and unless you use it wisely, it won't give you results. Here are some practical steps that will help you make the most out of your ₹10 Lakh Business Loan:

1. Prioritise High-ROI Investments

Invest in segments that offer tangible yields in terms of revenue generation. It can be sales, cost reduction, or enhanced efficiency. Avoid spending amounts of the loan on non-revenue-generating activities unless extremely unavoidable.

2. Monitor the Impact Periodically

Establish KPIs (Key Performance Indicators) for each investment. For example, if funds are being invested in marketing, measure lead conversions. If funds are being invested in equipment, measure the output increase.

3. Never Use Funds on Personal Expenses

Using the funds from a ₹10 Lakh Business Loan for personal expenditures can result in cash flow issues and make repayment difficult. Strictly use it for business expenditures and investment purposes only.

4. Plan Repayments Early

Plan out your ₹10 Lakh Business Loan EMI effectively. Make sure your business cash flow is able to support them without hassle and always has a small repayment buffer.

5. Keep a Reserve

In either case, keep 5–10% of the loan reserved for emergencies or unexpected opportunities. Having this financial backup can boost your confidence.

To Conclude

A ₹10 Lakh Business Loan offers a sufficient amount to small and medium sized businesses for growing and expanding their business. However, the secret lies in using the funds strategically. Use it on investments that will accelerate long-term growth, enhance operating effectiveness, and make your market presence more formidable. If you’re looking for a hassle-free way to obtain a ₹10 Lakh Business Loan, then you’re at the right place with Poonawalla Fincorp’s collateral-free business loans offer a high loan amount of up to ₹75 Lakhs. Apply online with minimal documents and get funds for your business without any delay.

Frequently Asked Questions

How do I use my ₹10 Lakh Business Loan effectively?
In order to use your business loan effectively, you must split it between urgent requirements, growth initiatives, and emergency funds. However, a major portion must be allocated to intended objectives.

 

What are the eligibility criteria to obtain a ₹10 Lakh Business Loan?
To avail of a Business Loan from Poonawalla Fincorp, you must be an Indian citizen between 24 to 65 years of age with a minimum business vintage of 2 years and a minimum annual turnover of ₹6 Lakhs. In addition, you must have a high credit score for seamless loan approvals.

Can I fund seasonal inventory through a Business Loan? 
Yes, if the sales projections indicate high sales possibilities, investment in seasonal stock can earn fast returns. A Business Loan offers an affordable way to arrange the necessary funding.

 

Should I spend the whole ₹10 Lakh Business Loan at once or in stages?
Depending on your specific business needs, you can use the funds from a Business Loan for any business expense or investment purpose. However, effective budgeting is important in order to improve cash flow and repay the Business Loan EMIs on time.

How much of the Business Loan amount should I keep as a reserve? 
Keeping at least 5–10% of the loan amount as an emergency or opportunity fund can provide flexibility and security.