Across all sectors, the demand for capital is a common trend. While the needs for a freelancer are completely different from those of restaurateur, they all depend on money. Are you a small business owner? Perhaps yes, and that is why you are here in the first place. But have you thought of how advantageous a small business loan can be? Well, maybe that thought has never crossed your mind. But if you have pondered on that, definitely you have been in a situation that really demands money, and the only possible source is a loan.
While it is true a loan might be the only way to go, even there you can find some hurdles. In fact, the situation can even be worse if you are in need of a business loan with no money. Have you ever been in a situation where there is zero balance in your account? If you have not, sooner or later your time will come, and when it does, you will only need to apply some basic knowledge. So then, understanding “why” such situations can happen will help to discern the right course of action. For this reason, let us discuss a few reasons why your business account may end up with a zero balance.
- You are awaiting payment. Most of the businesses operate on a contract basis. Is it the case with yours? If so, there times when you will be required to patiently wait for payment of the services rendered. It may even take many months for payments to be processed. Will you just sit and wait until then for you to continue with your projects? In fact, you continue to incur expenses even as you await payment. That is why the amount in your account will keep on reducing even to zero.
- Mixing business and personal funds. To the best level you can, avoid this kind of behavior. While it may be so difficult to view personal and business finances as distinct, it just the right thing to do. Otherwise, you may end up drawing too much cash from the business than you really think. As a result, you may start the financial crisis with your business. What is more, to be on the safer side always set a minimum balance in which your business bank account should not fall below. Do you need help in comparing the best loans to manage your personal and business funds? Visit Loan Advisor and learn more.
- Limited resources. Your business may have grown and needed more resources than before. As the business grows, you will need to supplement its capital, perhaps with a small business loan. By so doing you will be able to restock or bring in new commodities to meet the needs of your clients. Still, with a small business loan, you can hire more workers to help run the business effectively. For whichever case, your business may need more resources as it grows and as a result, you may exhaust all the money in the account.
With the above three facts, the significance of small business loans is no doubt clearer. There are so many sources of financing a business person may consider. To arrive at the best decisions, successful business people weigh the pros and cons of each source available. An option with many pros than cons is more likely to be considered. The remaining section of this article discusses the advantages of small business loans.
The Benefits of Small Business Loans
As outlined at the onset of the discussion, small business loans can benefit you in a large way. You can be able to buy a piece of new equipment, restock, or even expand your business. The following are some of the benefits of small business loans:
- High flexibility. There are so many small business loans you can choose from to meet your business needs. Various types of these loans are designed for different purposes such as for starting a venture, expanding or upgrading your premises. In addition, small business loans do not require down payments, collateral or warrant by a third party. This makes them even more attractive.
- Convenient to repay. The flexibility of small business loans extends down to their repayment provisions too. The flexibility is provided because the lenders themselves are acquainted with the complexities associated with businesses. The repayment strategies are designed in accordance with the business’s cash flow to prevent challenges in financial management. Besides, borrowers are at liberty to either increase or lessen the EMI depending on the financial situation of their business.
- Lowe interest rates. Most of the banks offer small business loans at lower interest rates. This is because some of these loans are provided by the government to improve the welfare of the public rather than benefiting banks and other money lending institutions. Additionally, interest rates do not solely depend on the loan amount. Several factors including the loan duration, the viability of the project, and details of the borrower among others are considered when determining the interest rates.
- Easy availability. Most of the lenders offer small business loans without demanding collateral. This makes it easy for small business owners to obtain and use them to sustain their projects. Besides, the process of obtaining these loans have been simplified than ever before.
- Availability of tax benefits. One of the main benefits of small business loans lies with tax relief. This is because the fraction of the profit needed for loan repayment is not subject to tax.
- No profit sharing with the lender. Unlike venture capitalists and business angels for partial ownership of the project, banks and other money lending institutions offering small business loans do not demand this, instead, the interest charged is enough.
- Several options are available. There are so many plans available. Some common examples include term loans along with standard business loans. The lenders only benefit from the interest attached to loans.
Time and again, small businesses require financial support. We started by reviewing the reason why a financial need may arise. We have also discussed the benefits business owners can gain from these loans. It is our hope that you find this article helpful. In case you need further help, feel free to inquire and we will be glad to help you.
Disclaimer: This content does not necessarily represent the views of IWB.