Business Loans for Human Resource Development – Great Intangible Returns for the Long Run
Businesses use debt in many ways in today’s scenario. It is very simple and common for a business owner or another authorized individual to go out there to the market or just browse online and find a loan for equipment purchase, rental payments, upgrades, new store openings and a lot of other such projects or even simply added liquid capital. However, what a lot of business owners tend to overlook, might just be the one that could provide top-notch returns on every dime invested! We here, are referring to Human Resource Development.
What is Human Resource Development?
Human Resource Development, or simply HRD in simplified business terminology, can be explained as a planned approach to enhance competencies in individuals and groups at a workplace/organization through learning activities. The aim of any initiative within HRD, is to ultimately ensure progress of the employees (the Human Resource of an organization) in a way that is useful to the business and individuals too – at a professional level.
Examples of HRD activities/initiatives may include educational programs, team building activities, fitness programs, time management training, support for qualifications and certifications, career guidance, cross-training and so on. HRD can be most effective when planned right and executed as per plans, that and be reviewed periodically keeping the progress in mind.
A great example we could give you from a past borrower of ours is, of a company that works as a logistics consultancy firm (name undisclosed as requested). The start-up company, just a few months old, took wonderful advantage of the fact that we ask no questions about where our clients invest until the time that they choose to leave a feedback. They used their loan from us at Business Capital USA to train their front line sales team in negotiation from a very reputable but equally expensive consultancy service. In a few months, the manager dealing with us was so happy about his team having cracked a lot of deals at amazing prices, that it drove him to call our team to specially thank us, which is one of the biggest things that keeps us as lenders, motivated to do our jobs well.
Who in an Organization Plans & Executes HRD?
Typically, larger organizations tend to benefit from a team dedicated towards planning and executing HRD. Smaller businesses might integrate this role with HR management, training management or the general management of the organization. We have served a company where the business owner himself did the task, possibly without even knowing that what she’s doing, is known in today’s business world as HRD (we say this because we later introduced her to the term after hearing about the experience and benefit her business had, through the initiative).
Why Investing in HRD can make your Money Grow Faster than the Interest Rate of your Loan?
Generally, it is safe to state that the goal of taking a business loan is usually to be able to generate an output from the money borrowed that is higher in value than the loan amount plus the interest that accrues from it. In simpler terms, a stakeholder in a business would like to see the loan money directly or indirectly grow into an amount larger than the loan’s payback itself.
Unlike equipment, liquid cash capital, refurbishment and other traditional investments of loans, HRD is an intangible investment. This is perhaps the reason why it often gets overlooked. However, the monetary and non-monetary gains that an organization can get out of having better skilled employees who work even better as a team, stay fit (hence requiring less leaves due to sickness), manage time efficiently and are greater at selling or producing what they are intended to, can be remarkably huge.
In our example from the past where the logistics company managed to bag multiple great deals thanks to a training in negotiation, if we assume that a training came at a cost of $2,000 which was financed by a loan which came at a total cost of $2500 and it resulted in an average of $500 increase in each negotiated contract value, in a matter of just 5 such sales, the loan amount was covered and every sale thereafter, was simply profit from the loan for the business, virtually coming out of the thin air! This is a scenario that is well plausible in today’s business environment and a lot of organizations of all sizes and industries are today able to utilize this and reap wonderful, lasting benefits.
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