Reasons for a Small Business Loan
• Maintaining diminishing business operations
• Investing in equipment
• Expanding into new branches and niches
The biggest merit of taking small business loans, however, is always increasing a franchise’s working capital and improve emergency business cash. Any company with a decent business plan and adequate prior research into the firm will not likely make any losses that insurance companies will not cover. It is true that when a business seeks to expand, it most probably has enough money to grow. However, the enterprise still needs extra cash to:
• Cover all unexpected costs
• Keep business operations running
The Benefits of Small Business Loans
The way the economy has been behaving for the last two decades has been incredibly favorable to debtors. Taking loans has been super easy as many creditors are looking for enterprises to invest in or lend money. Their competitiveness has led to the decline in borrowing expenses such as interest rates. However, the situation will change after a projected two to five years.
Bank loans are convenient and accessible. They offer loans to their long time clients. Most of the times, the creditors and debtors are so familiar with each other that services offered to come with a personalized feel.
Bank loans also do not claim profit shares. Instead of soliciting favors from capital denturists, it is better to obtain loans to raise capital. Interests charged on loans from creditors are one time and are very inexpensive. Creditors do not get any special claim to your decision-making processes or ownership of your venture. Venture capitalists and investors however repeatedly come back for more. They complicate our decision process and take you money every time an opportunity presents itself.
Apparently, bank loans offer tax benefits. How about that? The government actively tries to draw people into doing business and has been empowering small businesses by concocting all sorts of tax holidays to creditors financing small businesses. The government also exempts certain percentages on loans taken for small businesses from taxation.
Exercise Due Diligence
The first checkpoint in you due diligence journey is finding out whether or not your small business needs that additional capital. Unless your business is in financial limbo, it does need that extra capital to expand or stabilize operations.
Due to diligence basically means doing your homework. What options do you have? What implications does your every no or yes mean for you and your business? Exactly what amounts do you have to pay and after exactly how long? What happens if any of the parties involved default on the agreement terms? You should always have the fact that there are no monopolies in lending. You should also remember that some creditors are more shrewd and ruthless than others. In the credit game, reputation matters big time. Find out all the credit providers in the game and what their policy on your type of loan. Find out how much capacity they have to offer loans and their debt collection policy. Loans are very necessary for small businesses.
The two hardest questions businessmen should always ask themselves are:
1. How do I make use of the loan profitably?
2. Whose loan means the least liability to me?