Is there any prize of being your own boss? Yes, there are many benefits of being your own boss- you can make rules, you get to work for yourself, you make a profit and most importantly you get to do what you like. Business and finance are closely interrelated. Finance is at the core of any business. Any new business idea needs money to take shape. Small Business loans are the most famous way of getting finance for your business.
A typical benefit of a business loan is that the lending company is only concerned about the interest rate of the loan. Unlike any other investors, the loan provider doesn’t have any right in business profit or share of the company. Business loans have the ability to get fund fast and easy for any type of business requirement like starting a new business, expansion of an existing business, refinancing, purchase of equipment, etc.
There are two ways in which business loans are offered:
Secured Business Loans:
- A secured business loan can be the simplest and most efficient way to get financing for your business. It comes with many advantages which entail:
- Lower monthly repayments option
- Have the option to borrow more money
- The repayment is spread over a long period of time
A secured business loan has many benefits over other forms of loans. With it, you can have the flexibility to conserve your cash and working capital. You can use this money for any purpose like repaying your current loan. It allows you to design your own repayment schedule as per your budget. You can get access to money without any or minimal upfront charges.
With secured business loans, you can retain the ownership of the assets you are proving as collateral. Your home, car, any valuable property can act as security for secured business loans.
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The main drawback of secured business loans is there might be some situation which can be considered as default on the loans like late repayments, violation of any obligation in the loan agreement. If you talk openly with your lender about any default, you can sort out any difficulties at all regarding secured business loans.
Unsecured Business Loans:
- It also provides similar benefits as compared to secured loans except for any collateral for the loan. However, an unsecured business loan might include a higher rate of interest. The benefits of flexibility in repayments, ownership retention, budgeting are similar to secured loans. Interest payments on unsecured loans are tax-deductible. In the case of unsecured business loans, cash management is easy.
A credit score is a factor which helps the lender to decide whether you are a credit risk or not if they provide you a loan. A credit record which consists of late payments, defaults, etc won’t give a positive impression to the lender. If your credit score is low then an unsecured business loan application with a letter dictating your changed situation can leave a positive impact on the lender.
You should show very honesty as it is helpful in dealing with bad credit record. The best way of getting your loan application approved is to prove that you have the ability to repay the loan on time. Also, you can show the lender that you have invested in the business which will give confidence to the lender that your financial condition has become strong.
For business loans, you should be ready with business financial statements, business plan, and tax returns. The lender will ask questions so be prepared to answer them. You should take help of an accountant and emphasize on your financial records. You should be very clear why you need a business loan and give a convincing answer to the lender.
Getting funding for your company through a business loan is only an initial step. The next thing is about being a good borrower. If you maintain your track record good in the eyes of a lender, it will be helpful for you to get short term loans or long term loans in the future. Lenders might ask you to submit your financial statement on a regular basis. Hence, you should be ready to provide them. Understanding the need and executing them properly is the best way to maintain a good business relationship. Not all have the ability to start a business. If you have that then don’t let it go and take a business loan.
Proper research is very necessary to find a suitable loan for you. An unaware and unprepared borrower might find it confusing to choose a loan from various lenders. You should always look for a timely, reliable, accessible, consistent and relevant loan service.
Though business loans are a great way to gather funding for an organization yet they have to face many hurdles in order to get a loan from banks and credit union. In order to help them in getting fund, there are many online lenders who provide business loans at affordable terms and conditions.