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  • Why A Loan Might Be The Preferred Path To Growing Your Business

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    There is a variety of reasons why loans are vital for businesses, whether large, medium, or small. The main purpose of running a business is to earn more money through real profit gain, and the best way to do that is normally by expanding the business. This is, of course, the main reason for taking up a business loan. To grow your business, and optimise efficiency and profitability, you’re going to need money. An injection of additional funds to a business can be invested for advertising, to increase stock storage capacity, or to purchase better production equipment or technology to increase productivity. This will certainly give the company’s business a boost.

    Many entrepreneurs are under the impression that all debts are bad because of the interest payments involved. A common misconception is that it is better to expand using your own money rather than to borrow from a bank. This is, however, not entirely true. Using debt to fund your expansion can be less costly when seeking to grow your business as it potentially leads to better shareholder value or return on equity. Although there are risks involved in taking loans, the possibility of success leaning to lucrative profit gains is ever present; but the risks involved must indeed be calculated and mitigated. This also means that the increase in profit can be considerably more than the total amount of interest of the loan that needs to be paid back over time.

    Why would a loan be a better option than other sources of funding?

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    The main advantage of taking up a business loan in comparison to seeking other sources of financing like venture capital or investors is that you do not have to lose equity or control of your company. Having an investor strengthens the business’s financial support to help with the cash flow of your company; however, they may hold different beliefs and priorities from yours. Although an investor is motivated to see your company grow into a successful one, ultimately, the end goal is a return on the investment. They may hold high expectations on the returns from your business, and heap pressure on the business owners as well as place significant demands on the company’s progress.

    With partial equity in your business, they can curb the decision-making process and steer the company away from the direction you may have for your company. Relationships with friends and family who have invested in your company may be strained should the business take a wrong turn.

    When you forgo your independence to obtain financial support, you will ultimately need to take the priorities of others into account. They can either bring a lot of help or challenges to your business’ success.

    Have a safety net when a rainy day comes

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    SMEs should apply for a business loan as a financial buffer against unexpected expenditure. Even though a company is cash-rich, having some back-up money is always advisable should an unfortunate incident befall the company. A thriving business may suddenly experience a series of unfortunate events that would require an injection of fresh funds to countermeasure any cash shortfall caused by the losses.

    For instance, a fire that results in damage and losses to inventory and property of a company might necessitate extra funds in order for the situation to be remedied. Or a firm could overestimate the budget required for a big project it has undertaken which compromises its cash flow due to bad or slow repayment of debts. For day-to-day operations, the working capital that is required can be derived from a business loan. This contributes to growing the business in the long term and helping it consolidate itself, besides providing a buffer as back-up financing.

    Additionally, it is a good way to build trust and develop relationships in the financial sector and open up avenues for further development. When you build trust with the lender by strengthening its confidence in you by repaying the loan on time, more lucrative opportunities will be available to you in the future. It will also allow you to borrow bigger loans should you need it in the future as your business grows.

    Conclusion

    It is undeniable that for a company to grow, a fresh injection of funds is useful. Yes, there are many sources of funding you may consider to begin your business’s growth plan but, ultimately, if you want to maintain majority control of your business and make your own decisions in the way your company should grow, a loan would be the viable option for you. If you are looking for a bank loan for your business in Malaysia, try applying for the OCBC Business Term Loan, which requires no collateral required and is available for financing from RM50,000 up to RM600,000 and a tenure of up to five years. It comes with attractive interest rates of between 5.50% p.a.(EIR 10.01%) and 10.00% p.a. (EIR 17.27%). Enquire now at https://www.ocbc.com.my/BusinessTermLoan

  • How To Maintain A Competitive Edge With Bigger Companies

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    The big corporations of the world seem to have endless resources, unlike smaller companies that must run on fewer luxuries. Giant companies usually have in-house marketing teams and, if not, they are still able to afford and hire advertising agencies to create marketing collaterals, websites, messaging, advertising, direct mail and email campaigns. They test and retest, conduct quantitative analyses to measure market share, develop new creative messaging, focus on brand development and more. They hire the best and brightest out of business schools and they pay them hefty salaries. Their marketing budgets are in the millions – TV advertising budgets alone are in the hundreds of thousands to millions of dollars.

    Small firms, for the most part, do not have access to as many resources to do any of these things. So how can small businesses possibly compete and, importantly, survive and get the word out? Is it a losing battle from the very beginning? The answer is, of course not! Small businesses can most certainly find a competitive edge to compete with bigger companies.

    Alibaba – The Crocodile in the Yangtze River

    Alibaba Digital Economy Covid-19 Support Efforts | Alizila.com

    Jack Ma’s Alibaba overcame giants eBay to become the leading e-commerce website company in China. Back in 2003, eBay paid $150 million to buy EachNet, which was China’s top e-commerce site at the time. Their CEO was Meg Whitman, a Harvard Graduate with a distinguished resume which included being the former Vice President of The Walt Disney Company. The American behemoth entered the Chinese market backed with an abundance of resources, a talented workforce, and a strong brand reputation. On the other hand, Alibaba’s CEO was Jack Ma, a 10-time Harvard reject whose resume included 2 failed businesses and being an English school teacher. The odds were stacked against the local Chinese company.

    So what was Jack Ma’s solution to eBay’s competitive threat? Taobao, a Chinese online shopping website that offered free listings to sellers, introduced website features designed to act in local consumers’ best interests, such as instant messaging to facilitate buyer-seller communication and an escrow-based payment tool, Alipay. As a result, Taobao became a mainland China’s undisputed market leader within two years. Its market share surged from 8% to 59% between 2003 and 2005, while eBay China plunged from 79% to 36%.

    eBay on the other hand, suffered from a combination of poor management which included, for example, not giving enough power to local executives, which in turn crippled the business. “It’s very hard to compete with free,” said Jay Lee, eBay’s senior vice-president and managing director for the Asia Pacific. eBay shut down its operations in China in 2006, 3 years after entering the Chinese market. After this astounding victory, Jack Ma famously said, “eBay is a shark in the ocean. We are a crocodile in the Yangtze River. If we fight in the ocean, we will lose. But if we fight in the river, we will win.” Today, Alibaba is the world’s largest retailer and e-commerce company with online sales and profits surpassing all US retailers (including Walmart, Amazon, and eBay) combined since 2015.

    How to create your competitive edge

    Many say size does matters, but when it comes to business, it’s all about how you position yourself. Warren Buffett has been fairly successful in picking winners and he says the key to investing is not assessing how much an industry is going to affect society or how much it will grow, but rather determining the competitive advantage of any given company as well as the durability of that advantage.

    The term competitive advantage refers to a unique advantage a company has over companies offering similar goods or services that allow it to generate higher sales volumes or attract more customers. Jim Collins, in his book, ‘From Good to Great: Why Some Companies Make the Leap…and Others Don’t’, asked these three questions to unravel one’s competitive advantage:

    1. What can your business be the first at?
    2. What is that unique thing only your business can offer?
    3. What can your business be the best at?

    Any of the above will give you an idea of your competitive advantage. Once you can identify it you must be able to communicate it to your employees and your customers.

    Here are three steps that will help you discover your competitive advantage:

    1. Make a brag list.

      This means you make a list of the positive claims you can make through your marketing messages, advertisements or sales pitches. Here is where a true in-depth understanding of your business process is important. As you compile a list of all key activities that your business is good at, brainstorm as many as possible and list down every single one. For example, you might make claims like, we offer overnight shipping like Amazon Prime, or we have highly skilled service staff with a decade of experience behind or emphasise your excellent customer reviews online, or that your pricing is very attractive.

    2. List the things that your competitors do well to differentiate yourself from the competition.

      You must understand the strengths and weaknesses of your competitors. Review your competitors and make a list of all the things they do well. As you build the list, you may also notice some commonality and claims that your competitor might also do just as well as you. After building the list, cross out any activity that you and your competitors do well. This does not mean that you stop doing them, but helps to clarify that it can’t be your exclusive claim anymore. Jack Ma says, “you should learn from your competitor, but never copy them. Copy and you die.”

    3. Create a fresh list of advantages only your company can do exceptionally well.

      You can also interact with your customers and find out why they choose you over your competitor. This might lead to big revelations you might not have thought of before. At the end of this stage, you should only be left with two or three possible competitive advantages and choose the best one from them. You can consider the following reasons to choose your real competitive advantage. Cross out anything that can easily be copied by a competitor or any new entrants to the industry, things that cannot be marketed or advertised, or if the advantage could be turned against you by a competitor. The activity that you do excel in (that your competitor is not good at) and is valued by your customers becomes your competitive advantage.

    Once you have selected your competitive advantages make sure that you quantify them. For example, instead of claiming that you have the fastest service, say you have one hour response time that is five times faster than your immediate competitors. Instead of saying only “customer satisfaction,” quantify it with specifications like we have a 98.8% customer satisfaction rating which is the highest in the industry. Make sure that your unique claims are validated by quantifiable data to call them your competitive advantages and remember that it comes from what your people do and not from what they know. Performance and resolve are the key to measuring your competitive advantage. Always remember that most advantages can be duplicated within a certain period. Approximately 70% of all new products can be duplicated within one year 60-90% of process improvements eventually spread to your competitors.

    Capitalise on your advantage

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    Competitive advantage is a dynamic process that demands constant attention. If you want to make your competitive advantage sustainable make sure you keep refining them from time to time. However, simply knowing what your competitive advantage will not be enough if you do not capitalise on them. In business, it is natural to take risks to grow your business and remain competitive by trying new business strategies. To execute and realise them, an injection of funds is usually required. However, some businesses do lack the necessary funds and one good approach to source funding is to apply for a business loan.

    If you are looking for a bank loan for business in Malaysia, try applying for an OCBC Business Term Loan. It comes with no collateral and a financing amount from RM50,000 up to RM600,000 and a tenure of financing of up to five years to repay the loan with attractive interest rates between 5.50% p.a. (Effective Interest Rate 10.01%) and 10.00% p.a. (Effective Interest Rate 17.27%). Enquire now at https://www.ocbc.com.my/BusinessTermLoan