One of the things that I considered to grow my business was to take out a business loan, similar to the usda loans florida lend out. As a small business owner, maintaining and securing all finances, operations expenses, expanding of locations, investing in new equipment, and hiring new employees has always been my top priorities. And I believed that taking out a business cash advance loan would help me to achieve them all.
However, some businesses are not entirely sure the business loan is right for them. Well, in this article, I will be breaking down the list of common advantages and disadvantages of taking out a business loan. I will also include some Frequently Asked Questions that you need to ask yourself if you still feel overwhelmed.
The Advantages of a Business Loan
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It can grow your business as you receive an influx of cash.
According to many business entities, one of the easiest ways to enhance cash flow is to take out a business loan. A business loan is a good choice if you are into the early stages of a business venture as it can be your backbone to expanding and growing operations. And if you can compare it with other funding solutions, you are taking a risk to access a relatively large sum and have a huge amount of capital for multiple purposes. Additionally, it is recommended to obtain a business loan from local firms that can make it available in a very short span of time. If you live in the Philippines, for example, you can contact a reputed and trustworthy company during an emergency situation (if interested, check out business loan philippines).
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This could maintain the control of your business.
Taking out a business loan is, by far, a better way compared to borrowing equity or where your business issues the shares. This is because no bank could get involved in any of the aspects of running your business, so as a business owner, you will have a chance to retain full control in managing the business/company’s operations while still reaping the benefits of having extra cash. For instance, if you were to invest in a home healthcare franchise, then opting for a loan to do so would be more profitable compared to equity financing. In debt financing (loan), you would not need to give up any control of the business–you pretty much take all the decisions. However, in contrast to loans, if you were to avail of the latter, then you would be required to sell a portion of your company’s equity in return for capital. Consequently, you would have to share your profits and consult with your new partners any time you make decisions involving the company.
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All accumulated interest is tax-deductible
You would probably ring in your ears if you heard the words “tax-deductible.” However, in the sense of business loans, interest in all your business bank loan is tax-deductible. Particularly if the bank has a fixed rate of loans, the interest is fixed as it does not change throughout your loan. And this advantage could help small business owners to budget and make a plan for monthly loan payments.
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Can give chances of attraction to gain business hosts.
If you accept a business loan from a bank, your priority is to expand the name of the business. This means that if you have the manpower to help, invite many business firms, while you are in a launch stage, overusing the cash you loan.
The Disadvantages of a Business Loan
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Tough Qualifying
There was always a problem if your business was not that huge unless you were a small business owner with a considerable track record, owning valuable assets like real estate. It would otherwise be harder to convince the bank to obtain a business loan. Like if you are applying for a mortgage, the bank is now very careful about lending.
They always make sure that you can pay them back. And sometimes, the bank wants to provide the borrower a guarantee, like risking personal assets that will be seized whenever a business loan fails and is unable to be repaid in terms of the interest and the loan.
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There is a high rate of interest
A high-interest rate is one of the huge disadvantages of a business loan. It would be a disservice for your business if you borrowed with a high rate of interest when the expense could be better spent elsewhere growing the business.
Frequently Asked Questions upon considering a business loan:
Did you know that borrowing money for your little or big business has always had its pros and cons? As well as with any business decisions that involve money. If you think that you are not that sure about obtaining a business loan, here are some questions that you need to reflect on:
- How much funding do I need to consider?
- Do I have a timeline in which I need the money?
- Do my business assets qualify as a borrower?
- And if so, what plan do I need to consider to take on and spend the money?