How to Increase the Profitability of Your Business

There are basically four main areas that drive the profitability of a business. These are:

  • Cost reduction
  • Increase in turnover
  • Increase in productivity
  • Increase in efficiency

A business can also plan to venture into newer, lucrative markets or come up with new and innovative products or services. 

Cost Management to Drive Business Profitability

Your profitability is affected by how you manage your costs. Almost all businesses can identify areas where they can reduce costs in their operations but it’s vital to avoid cutting costs by compromising on the product or service quality. All businesses must assess their main cost areas. These include suppliers, finance, production, premises etc.

For instance, check if you are getting a good deal from your main suppliers. You might be in a position to negotiate a better rate or even change your supplier. Businesses can also consider buying on an “on demand” basis in order to utilise their working capital more effectively and improve the prospects of expansion.

Similarly, as far as financial management is concerned, it’s crucial to review your finance options. Are you getting your business loan at a good competitive rate? Are you making effective use of overdrafts and commercial loans? Is your repayment schedule easy to manage?

Commercial Loans for Business Expansion and Sustainability

Let’s begin by gaining an understanding of commercial loans and how they can help businesses grow. Commercial loans are essentially debt-based funding schemes set up for businesses by financial institutions such as banks or non bank finance companies. Typically, the proceeds these loans are used for funding huge capital expenditures or operations which would otherwise be unaffordable for the business.

Business lending in New Zealand is a common way to expand your business operations. If you are looking for business lending in Wellington, secured or unsecured loans are generally offered for a short period of time (30 days to a year), for financing machinery, inventory etc. Commercial loans from finance companies in Wellington require the borrowers to give monthly and yearly financial statements as well as maintain insurance coverage on the item which is financed.

Advantages of Commercial Loans

To grow your business you usually have to have sufficient funds to undertake operations on a larger scale. A commercial loan enables you to keep an operating cash flow and makes it easier to pay for unexpected expenses that may arise. The new revenue generated from your growing business will enable you to pay back your loan and, hopefully, turn a profit as well.

Another point to note about commercial loans is that the owner does not have individual liability. This means, that the loan will generally have to be paid back by the company or corporate entity. So in the case of failure to pay, the business will undergo liquidation to pay part or all of the money borrowed from the lender.

Businesses looking to drive profitability through expansion can particularly benefit from commercial loans because of the low rates of interest in the current business climate. Non bank financial institutions will often be able to offer customers an even more competitive interest loan rate than banks and other traditional lenders.

If your business is based in Wellington and you need a commercial loan why not talk to the team at Oxford Finance. They can discuss your plans for business growth and provide financial advice and lending plans to help your achieve your goals. Just visit the website www.oxfordfinance.co.nz for more information.

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