If you’re thinking of a business loan or emergency business cash, there exist all kinds opinions out there. Most of what will hear as cautionary tells. Everyone has an opinion on what might happen to your business if you take a loan to grow or start a business venture.It’s true that getting a loan is not always a smart decision, but there are good reasons for considering a loan.
The number of reasons why you might need a business loan is as varied as the types of businesses ventures and business loans available. As a business owner, you might need financing to expand your location or purchase equipment. You need to consider which type of loan you need to take advantage of, and how you’re going to use it.
What to consider when getting a loan business loan;
1. Understand your options
There are lots of lenders at there, from tradition (banks and credit unions) to the nontraditional lenders. Here are some of the options available;
SBA loans; There are various SBA-backed small business loans made through financial institutions and other agencies. You can utilize the loans in financing equipment, furniture, supplies, inventory and much more.
Line-of-credit loans: This type of loans allow you to access a specified amount funds on an as-needed basis. The money is deposited in your business checking account.
Revolving lines of credit:
This is a revolving line of credit. The lender allows you to borrow a certain amount of money and lends you a similar amount again on repayment.
Angel investment: Between the first and the second year of your business’s existence, you may need capital injection; this is where an angel investor comes in. However, angels investors demand a well-defined business model, equity and a high return on investment.
Loans from friends and family.
2. Credit rating
Your personal and business credit history is the first item reviewed by the lenders. Before seeking for lending, you must be familiar with your credit history. Get a copy of your credit report and authenticate its accuracy. If you find errors in your report, contact credit bureaus to have it corrected. The amount of financing requested, industry, time in business, the size of business and type of business also play a part in the credit review process.
3. Length of loan
The total cost of loan also depends on the length of the loan. Discuss your options with the lender.
Not every reason is a good reason to get a loan, however, if your business is growing and you don’t have enough capital to keep up with the growth, it’s time to consider a business loan.