Perhaps a friend or colleague has advised you to take out a loan for your small business, but you’re still in doubt. After all, you may not want to burden your business with debt. However, the following reasons may convince you to consider a small business loan.
1. Enjoy Flexibility
Loans for small businesses have varying terms and repayment periods that can suit your business needs. You can go for a long-term loan with an extended repayment duration or a short-term loan that has to be repaid after a short time. Your choice will depend on whether the loan is for personal, business, or mixed-use. In some cases, you can even apply for many types of loans.
Generally, business borrowers do not need to have collateral or a specific revenue to apply for a loan. The lack of requirements is an advantage to a small business that just started and has limited income or no assets to put up as collateral. Hence, aspiring business owners can easily enter the corporate world quickly and get their businesses running.
3. Retain Full Ownership
When you get financing from investors or partnerships, you must relinquish a portion of the business. Although the arrangement may be helpful initially, problems may arise as the company expands. You have to consult partners on significant decisions and how the business operates, but a loan allows you to keep full ownership of your business.
4. Improve Business Credit
If you repay the loan on time, you will boost your business’s credit score. A good credit score makes it easier to get more loans at favorable terms in the future. For example, companies with good credit scores tend to get lower interest rates for their loans and can easily avoid accrued interest.
5. Access Funds Quickly
Business expansion requires significant capital to hire new employees and operate the business. You can choose to wait for business profits to increase before reinvesting them. However, if you have projects that should start soon, you may take out a loan. The loan allows you to buy new equipment and finance new product development before your competitors do it first.
6. Take Advantage of Low-Interest Rates
Lenders often provide low-interest rates on business loans to get customers. As competition in the lending business becomes stiffer, business borrowers can negotiate for the best deals. Also, business loans are likely to come with lower interest rates than any personal loan.
7. Nurture Relationships With a Specific Lender
When you nurture relationships with your lender, you increase your chances of getting a loan in the future. The lender will have worked with you and knows how you handle money. The next time you go to get a loan, you can always refer back to the previous loan that you repaid on time.
8. Overcome Liquidity Problems
Businesses require working capital to operate effectively. However, small businesses often face challenges that make it difficult to meet utilities and payroll requirements. Since these challenging times are temporary, the business can get through the hard times with the help of a small business loan.
9. Refinance Debt
If your business already has a loan, the mounting debt may interfere with your ability to pay bills and sustain business operations. A small business loan can help refinance your debt and give you time to pay off any loans. The new loan may have a lower monthly payment and interest rates.
10. Reduce Tax Payments
Sometimes, your tax obligations may be lower if you take out a small business loan. For example, you can claim deductibles on the interest you pay on loans. The best approach is to consult a tax expert to know how taking a loan can impact your taxes.
Taking a loan for your small business is easy if you use the right lender. Huntington Coast Capital provides lending solutions for small and medium businesses that need quick cash. Contact us for more information.