Personal Loan as a Solution to Your High Operating Expenses

By Pardeep Garg

The business owners run their business out of their experience and deep understanding. However, how good your business might look on paper, if you’re not managing your cash flow, you are getting yourself into a big mess.

There are two variables that determine the profitability of your business: the revenue that comes in and the expenses that go out. Once a business has control over these two, it can be managed. The revenue of a business comes from its operation. However, what is difficult to manage is its expenses. Let’s dig in to understand and minimized those expenses!

What are the Operating Expenses?

Operating costs are the costs involved in the day-to-day management of your company. They include the cost of goods sold (COGS), payroll, employee benefits, sales commissions, maintenance costs. The key to improving your bottom line is to know how to measure these expenses. Lower operating expenses have a direct impact on increased profitability.

Managing of Expenses

There are a few other things to consider that impact your expenses and require proper management as well:

Cash Flow Cost

A business runs smoothly as long as its cashflow runs smoothly. If a business fails at honoring their commitments, they expose themselves to higher borrowing costs for short term funds, high buying cost due to delayed payments, cost of credibility and cost of disruption.

It is important to keep the funds for the purpose they are assigned. It is not advisable to use funds for personal uses or divert them for other business uses, as it will lead to stress at the time when the settlements are due.

Rent Expense

This is a big predictable expense along with the cost of manpower. It is best to rent a property in a non-commercial area, where the cost is lesser.

Cost of Human Resources

Additional manpower can add value to the company. Whereas, the excessive manpower can bring inefficiency. The business should be aware of the value the employee is bringing in. The output of the employee should be worth the cost of the employee.

Cost of Inventory

An inventory should be managed efficiently and with proper control. If the inventory is held it exposes the business to the risk of it becoming obsolete, and may create a holding cost for the business.

IT Costs

It is important for a business to be automated in this era of digitization. The business should realize that the cost of having IT Systems is lesser than the cost of not having them.

Risk of Default

A business runs on trust. However, even one creditor defaulting can shake the entire foundation of the business. Therefore, a business should do proper screening in order to reduce credit risk.

How to Manage Your Cashflow

If you have a great idea and profits coming to your way, low cash flow can be a hurdle. Below are some tips to manage and keep a healthy cash flow for your business.

Pay Attention to Expenses

It is important to make a budget for monthly expenses and revenue. Without following and maintaining a budget, you would end up having a greater outflow as compared to your inflow.

Long-Term Planning

For positive cash flow, it is important to have proper planning for the future. Sometimes business owners get caught up in day-to-day activities, where completely forget to plan for the long term.

Maintain Reserves

Cash reserves can serve great importance when it comes to a time of cash crunch. Just plan for enough reserves in case a financial emergency occurs.

Seek Personal Loan

A personal loan is an uncollateralized loan. Interest rates are charged in two ways: reducing rate and flat rate. Personal loans in the UAE are a preferred means of short term credit. Dubai Islamic Bank Personal Loan, ADCB Personal Loan, and Emirates NBD Personal Loan etc are to name a few personal loans available in the UAE.

Pros of Availing Personal Loan for Business

  • It’s Easy to Qualify: If you’re a new business it can be difficult for you to find lenders who are willing to provide you with funding. Availing a Personal Loan can be easy in that case, because the lender will assess your personal financial background, i.e. your credit score and credit history and not your company’s finances. You also don’t need to submit any business plans or documents. Personal loans can be availed at low rates if your credit history looks good.
  • You Don’t Need Collateral: Most loan providers require you to securitize your assets against the loan. This is done as a security of the loan amount borrowed. In personal loans, you don’t need to provide any collateral. However, in case of default, it will impact on the credit score.
  • Quick Approval of Funds: In most of the other loans, the documentation and approval of funds can be a time-consuming process. However, in case of a PL with the correct documents, the funds can be approved very quickly. Some providers offer to raise funds online as well.

Various Options of Personal Loan in UAE

  1. Dubai Islamic Bank Personal Loan
  2. RakBank Personal Loan
  3. ADCB Bank Personal Loan
  4. United Arab Bank Personal Loan
  5. Commercial Bank of Dubai Personal Loan

To conclude

Every business is vulnerable to certain risks. And financial risk being the foremost one requires your attention. Also consider the market trends. It is advisable for small businesses to think forward and see how their fellow peers are doing about the trends in the market. A business should learn from its competitors, as it helps in survival.

To implement these ideas and bend according to the trend it is best for a business to raise unsecured funding, such as a Dubai Islamic Bank Personal Loan. This is so that they are able to cover operating expenses as well as have positive cashflow.

About the Author

Pardeep Garg is online entrepreneur, motivational speaker, and author. He is passionate about market research and loves to write on topics Market Research, Business,  digital marketing, Finance, Information and opinions to success in life.

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