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|Rich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, directors of training and marketing, and now as a consultant to the industry. Rich has written extensively on a broad range of personal finance topics and is published on several top financial sites. Recent books include The American Family Survival Bible and Annuity Facts Revealed: What You MUST Know Before You Invest.|
How Small Business Loans Can Advance Your Marketing Plan
Having a well-conceived marketing plan is essential for small businesses, especially in the early stages when generating demand and building a customer base is of the utmost importance. That is when a business should allocate the largest percentage of its revenue to marketing so that early efforts can generate returns that can support an ongoing marketing strategy. Some small businesses spend up to 50 percent of their revenue to launch a marketing program because they know it is the best investment they can make. However, if a younger business is not generating sufficient income to fund a marketing strategy, it should consider financing it as it would new equipment or inventory or any other investment in the business.
Fortunately, small businesses have several financing options that can help them launch a serious marketing plan. However, before considering financing options, a business needs to know what exactly will go into its marketing strategy to determine its costs and the best option for financing it.
What Goes into a Marketing Strategy?
In today’s web-wired world, the core of any marketing strategy is an effective web presence, if for no other reason than to validate one’s existence to the market. If your business is going to be found, it must reside where the vast majority of consumers reside on the Internet.
The cost to launch a high-quality website with mobile responsiveness can range between $3,000 and $10,000. The ongoing costs of maintaining the site, including security certification, hosting, and maintenance can run between $600 and $1,500 a year. However, that is just to get your web apparatus in place. To raise its visibility and generate a continuous stream of traffic, a website needs content, a lot of fresh, compelling content.
It takes time and/or money to create a continuous stream of fresh content. Some businesses are able to do it on their own, but it can time consuming and it becomes increasingly difficult to come up with fresh new content ideas. Businesses that are willing to invest in their marketing strategy will outsource their content creation at a cost of between $300 to $1,000 a month depending on how frequently that want to add new content.
Financing Sources for a Marketing Strategy
Once you have determined your marketing budget, you can begin to consider your options for financing your marketing. Every business is unique as are their marketing needs; however, for most businesses, a budget of $10,000 will cover the initial costs of the launch, while providing a reserve for ongoing costs until revenues are sufficient to cover them. Here are the best options to consider depending where your business is in its development.
Another source for businesses that have yet to establish a solid credit history is a Small Business Administration (SBA) Microloan. Microloans are issued by SBA-designated microlenders in amounts ranging from $500 to $35,000. Qualification criteria vary from lender to lender, but, generally, microlenders may require some form of collateral or personal guarantee from the business owner. You can find a list of microlenders at the S.B.A. site. The loan rates range from 10 to 13 percent.
A business line-of-credit (LOC) may be the best option for any business because you can control the amount that needs to be borrowed and the interest costs. However, a business line-of-credit is more difficult to obtain as banks typically require a solid credit history and evidence of steady profits. With an LOC, you only need to make interest payments, and, once you repay the principal, you can access the line again at any time.
If you’re business is too young to qualify for a business loan or a line of credit you could tap into a fast-growing lending source called peer-to-peer (P2P) lending via the Web. P2P websites are where borrowers and investors come together to fulfill each other’s needs. Investors are looking for better yield on their money, and borrowers are seeking funding that may not be available through traditional banking sources. P2P sites such as Lending Club and Prosper, screen prospective borrowers based on their creditworthiness and business potential. If you create a good profile that expresses a compelling business need, you are likely to attract a pool of investors willing to lend you some money. The loan rates range from 7 to 29 percent.
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