Should I Get A Small Business Loan?


No one knows for sure what the future holds, but if you're thinking about starting or growing your small business, it's a good idea to explore all of your financing options. One popular financing option is a small business loan. But, before you dive in, it's important to understand the pros and cons of a small business loan, so you can make an informed decision.

What is a small business loan, and how does it work?

A small business loan is a type of financing specifically designed to help small businesses launch, expand or cover operational costs. Unlike a traditional bank loan, which is typically used for large-scale projects or investments, a small business loan is much smaller in scale and can be used for a variety of purposes, including purchasing inventory, hiring new employees or covering marketing expenses. Oftentimes, small business loans have lower interest rates than other types of financing, making them an attractive option for businesses in need of extra capital. In order to qualify for a small business loan, businesses must typically have been in operation for at least six months and have a good credit history. The application process usually involves providing financial statements and tax returns, as well as a detailed business plan. If approved, the loan will be disbursed in one lump sum, which the borrower will then repay over time with interest. Small business loans can be an extremely helpful tool for businesses in need of extra capital, but it is important to understand the terms and conditions of your specific loan offer before signing on the line.

The benefits of getting a small business loan.

When most people think of taking out a loan, they immediately think of the disadvantages— having to pay back the money with interest, going into debt, the anxiety around taking a risk, etc. However, there are numerous advantages to taking out a small business loan. For one, it can help get your business off the ground or fund necessary expansion. If you have a great idea for a new business but don't have the start-up capital, a loan can provide the funds you need to get started. If you need to purchase new equipment or renovate your premises, a loan can provide funding needed to do so. Finally, a loan can give you the financial flexibility to take advantage of unexpected opportunities. If you're presented with a special prospect, but don't have the cash on hand to take advantage of it, a loan can help you make it happen. As you can see, there are several pros to taking out a small business loan, so it's worth considering.

The risks of getting a small business loan.

While a loan can be a helpful way to finance a new business, there are also some risks involved. One of the biggest is that you may not be able to repay the loan. If you default on your loan, the lender could take legal action against you and your business. This could lead to the loss of your business, as well as damage to your personal credit. Another risk is that you may end up paying more in interest and fees than you originally anticipated. Make sure to do your research, obtain several quotes and understand the terms of each prospective loan before you sign any paperwork. By taking the time to educate yourself on the risks, you can help ensure your loan is a successful investment in your business.

How to apply for a small business loan.

First, you'll need to gather all the necessary documents, which varies depending on the lender, but typically include tax returns, financial statements and your business plan. Once you have everything in order, you'll fill out a loan application and submit it to the lender.

The lender will then review your application and supporting documentation to determine whether or not you qualify for the loan. If you do, they'll send you a loan offer, which you can either accept or reject. If you accept, you'll sign the loan agreement and begin making monthly payments. Of course, this is just a general overview of the process, and there may be some variations depending on the lender and type of loan you're applying for.

What to do if you're denied a small business loan.

Being denied a small business loan can be frustrating, but it's important to remember that it's not the end of the road. There are a few things you can do to improve your chances of being approved for funding in the future. First, make sure to review the reasons why your loan was denied and address any areas of concern. If anything is unclear, work with the financial institution to better understand their points. Second, try to build up your business’ credit score by making timely payments on existing loans and lines of credit. Finally, consider alternative sources of funding, such as grants or private investors. By taking these steps, you can improve your chances of being approved for a small business loan in the future.

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