Should You Fund Your Marketing Campaign With Business Financing? 3 Things to Consider

  •    Meredith Wood is Editor-in-Chief at Fundera, an online marketplace for small business loans.

Running a business costs money—and a lot of it. And with every dime you spend to keep your doors open, forking over cash for things you deem “inessential” can feel painful, if not downright out of the question. That can sometimes leave plans that fall under the marketing umbrella by the wayside.

There are a lot of reasons, though, that your marketing campaign should be anything but an afterthought. Putting effort into business events, branding, web design and social media is essential to growing your brand and driving revenue. Good marketing campaigns can often drive so much return on investment that they pay for themselves.

Many savvy business owners look at marketing as not an expense, but an investment, and some decide to use small business financing to fund these plans. That just might work for you, too. Before you take on debt to fund your marketing campaign, though, ask yourself these three questions:

1. Do you have a specific goal for your campaign?

One thing we’ll be clear about out of the gate is that you never want to take on debt for marketing operations unless you’re clear about its purpose. That’s true across the board, whether you’re looking into a more powerful business financing tool like a line of credit, or even just an entry-level business credit card with no annual fee.

Although you’re never guaranteed to make back your money on a marketing campaign, you want to use debt-based financing for marketing with higher probability of success to drive return. It’s just logical: the longer you wait to repay your debt, the more expensive your loan becomes. You want to make sure that you’re focused with your marketing goal—not all over the place—to be effective.

2. Do you know how you’re going to drive high ROI?

Are you clear about how your campaign is meant to convert sales for your company? The mechanics behind the conversion are essential because that’s how you’ll end up measuring your return on investment (in other words, how much money you made versus what you put in).

And, considering you’re looking into taking on debt to finance your marketing campaign, you’ll want to be certain that you’ve identified an effective conversion methodology. At the end of your marketing campaign, not only will you be (hopefully!) growing your business, but you’ll be (definitely!) paying back the money you used to finance the campaign.

Although a well-run marketing campaign will also deliver you soft ROI, like increased word-of-mouth or logo recognition, you’ll want to make sure you’ll get a return on your hard ROI first and foremost. Ideally, try to run some numbers before you apply to take on your financing to estimate your expected ROI. Hopefully, your hard numbers will show your still profiting from your campaign, even after paying back both your principal, and any interest accrued.

3. Is your credit score where it should be?

This one’s not so much about your marketing campaign itself, but instead requires you to take a good look at your own finances. So much of the decision around business financing begins (and, unfortunately, sometimes ends) with your credit history.

If you’re applying for business financing through a small business lender, the amount you’ll be approved for, the interest rate on your loan, and your repayment terms will all be contingent on how the lender sees your history with debt. Have you been responsible with paying back your bills in the past? Can they trust you?

Even when it comes to business credit cards, card issuers go through similar thought processes. They’re concerned about getting paid back on any debt you accrue, too. Your credit limit, APR, and whether or not you’ll be approved for certain higher-reward or perk-centric cards depends on your credit history.

That’s all to say that if your credit history isn’t super solid, or you know it could be stronger, you might not be quite ready to finance your marketing plan with business funding. If you’re not going after a specifically time-sensitive opportunity, spending a little time building your credit—paying off your your bills in full and on time, and lowering your credit utilization, for instance—could open up opportunities for better products and less expensive financing.

Understanding Whether You’re Ready to Fund Your Marketing Plan with Business Financing

There are a few things to look into before you make the jump into financing your marketing operations with debt financing.

Even if your marketing campaign is laser-focused and you know you have a big opportunity to seize with your target audience, your credit might be in a place where it’s worth waiting to get favorable terms on business financing to do a big project. On the same token, you might choose to put your project on a credit card, but not be sure that you’ll generate the returns you want—and in that case, you’ll end up paying expensive interest for an initiative that doesn’t pay off.

But when you have a good sense that you’re ready to use business financing for your marketing plan, freeing up extra capital is an absolute game-changer. It can allow you to scale your reach, grow your business, and drive opportunities in a way you wouldn’t have been able to if you were just worrying about keeping the lights on.