7 Rules of Spending Business Loan Money

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Before you apply for a business loan you should first determine the loan amount you need. This amount can be used for expansion of your business or to sustain it.The loan can be taken for purchasing more infrastructure and goods or for opening a new operation in your business and sometimes to hire resources for your increased business needs. After the due diligence of filling out application forms and going through a tedious loan process, your next focus should be on carefully utilizing the loan amount for the purpose it is intended. Some businesses continue to make mistakes in properly utilizing the loan money. Hence some basic rules should be followed while you spend the loan money. We list out seven such rules to spend your business loan money.

Business Loan Money

1. Prepare budget plan

Generally, accountants and finance department keep a track of business expenses and help in planning budget for the next quarter or month. If you don’t have a proper plan for spending your money then you will never be able to keep a track of your expenses. Allocate money for various purposes like payrolls, buying inventories etc. Make sure you don’t exceed this limit. At the end of the cycle analyze whether you were able to meet your budget. Once your budget is fixed you will be able to decide where to use the remainder of your loan amount.

2. Maintain a separate account

If you keep your business money, personal account money and business loan money altogether in a single account, it will be very difficult to track what goes where. Hence it is always advisable to keep a separate account for business loan money. This way, you will always be on your toes when you withdraw money from the loan account. You will have a clear estimate of what you will be left with.

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3. Invest in your business tools

Using business loan money you can take a step forward and purchase more tools and stocks for your inventories. You can improve the quality of your machinery and hire the latest technology available in the market. Try to update your business tools with the loan money as staying abreast with technology and new business tools is a must in today’s competitive era.

4. Invest in manpower

More manpower and especially more skilled manpower can always help in increasing the productivity. From time to time you must focus on hiring fresh and skilled people for your business. Invest in various types of training that can be useful for your employees. If your employees are doing good then you should try to encourage them by keeping an amount of loan money towards employee welfare and rewards.

5. Keep track of your finances and minimize your wastes

Keep a track of your outgoing and incoming cash flow. Identify the areas where you can do cost cutting and areas where you can spend more provided there is a potential for profit. Avoid wastes by identifying such areas.

6. Don’t deviate the loan amount for any other purpose

With more capital in hand, you may be tempted to utilize loan amount for work it was not meant to be. Don’t make that mistake. While many banks and lenders are not particularly bothered by what you do with your loan amount, some of them are very specific on its usage. Few loans are given only for business purposes and if you deviate from the course then you may even be liable to face a legal suit.

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7. Audits

No matter you own a middle-sized or large sized business audits are always important. You cannot track everything on your own and hence you should hire a third party auditor. Some business owners prefer to have a team of internal auditors who can check all the revenues and losses.


In the end, remember to follow your repayment schedule religiously. Keep in mind, sometimes we have to re-strategize if our current plan isn’t working. We should always strive to avoid such scenarios. Thus by following above seven rules you can be in control of your loan amount and ensure to harness positive outcomes for your business.

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