The Small Business Administration (SBA) in the United States (U.S.) mentioned that the average marketing spending of businesses in 2018 was nearly 8% of their revenue.
SBA is an independent agency in the U.S. that aims to support small businesses and entrepreneurs.
This figure, reported by SBA, gives you an idea of how much budget you should consider allocating and raising for your marketing plans.
Suppose you’re running a startup business and planning to increase your marketing budget through a loan. How do you raise funds for this budget?
What options do you have if you want to apply for a loan to fund your marketing objectives?
This article discusses how your business can raise funds to increase your marketing budget and lists the different loan options that can help grow this budget.
Businesses set up their budget for different purposes, and marketing is among the numerous items that need budgeting.
For many enterprises, including small businesses and startups, allocating a budget can be challenging, especially when funds are insufficient. In this case, fundraising by taking out a loan is one way to increase the marketing budget.
If you’re running a business, raising funds through a loan should be a well-thought-out strategy to avoid getting into trouble later. Fortunately, some debt relief solutions, like the ones that help you get out of payday loan debt and other business and personal loans, can assist in debt management.
Keep reading to learn how much loan you should consider taking to help raise your marketing budget.
How to Raise Funds to Increase Your Marketing Budget
Budgeting and raising enough funds is a crucial element of any marketing plan. But before creating your marketing budget, identify your goals and the proper channels to reach your target audience.
Figure out your short- and long-term goals and set KPIs (key performance indicators) for your marketing strategy.
Examples of these goals include the following:
- Decrease the website bounce rate (percentage of online visitors that don’t take action) by 5%
- Generate 100 new social media followers monthly to help boost brand awareness
- Appear on the first page of Google for three main focus keywords
- Generate a sales funnel that produces 20% new customers within the next three years
Consider getting a quote from a digital marketing agency when determining how much money you must raise. Such agencies, like Modern Marketing Partners, provide various services to help you achieve these goals. These services include:
- Web design
- SEO (search engine optimization)
- Paid search
- eCommerce
- Social media marketing
- Content marketing
- Analytics and reporting
- Email marketing
You must adjust your budget accordingly depending on your marketing goals and the services you need. If you’re taking out a loan, some experts suggest allocating 10% to 30% of the loaned amount to marketing costs.
Additionally, your marketing budget should depend on the type of business you’re running. The U.S. Small Business Administration provides the following advertising budget estimates:
- On average, businesses spend 1.08% of their revenue on advertising.
- Retailers may spend about 4% of their revenue on advertising, while restaurants spend around 1.93%.
- For B2B (business-to-business) product companies, 6.3% of their revenue goes to ads. Meanwhile, service-oriented B2B companies spend 6.9%.
- B2C (business-to-customer) product companies spend an average of 9.6% of their revenue on advertisements. On the other hand, B2C service companies spend 11.8%.
From these estimates, you can get an idea of how much budget to allocate for your marketing. You can also determine how much funds to raise with a few calculations.
Aside from your budget proposal, you should also have strong business credit. This way, you’ll encounter fewer obstacles when you need financing for marketing.
When you approach a lending institution for fundraising, a solid business credit report can positively affect your bottom line through better funding options like:
- Better credit terms from suppliers
- Lower financing costs on credit cards and loans
- Lower insurance premiums
In particular, lenders will look into the following elements when deciding to approve a business loan:
- Capacity: Includes business revenue, cash flow, and outstanding debt
- Character: Consists of the owner’s credentials like education, experience, reputation, and references
- Collateral: Includes tangible assets like inventory, vehicles, accounts receivable, or real estate
- Capital: Consists of the owner’s investment in the business, like stocks, equipment, and property
- Conditions: Includes industry conditions, economic status, and competition
Should these credit elements appear in favor of your business and the loan you’re taking, the lender will likely approve your application to take a loan for raising marketing funds.
Types of Loans for Your Business
Once you’ve determined your marketing goals and budget, you can choose which loan type to take. Financial institutions usually offer the following types of loans:
- Small business loans: Provides simple repayment terms to reduce cash flow strain
- Credit line: Recommended for businesses that need to take a specific amount of money only
- Working capital loans: Provides financing for enterprises with a cash flow shortfall or entrepreneurs looking for a new business opportunity
- SBA loans: Excellent for small businesses that need to grow their operations and require long repayment periods
Once you get approved for a loan, the next step is to utilize the money you raised for marketing. With the right marketing strategy, budget, and a seasoned digital marketing agency partner, you’ll likely see your plans succeed and enjoy the investment returns you deserve.
