The entire process of applying for a loan can take months or longer. You have to complete the documentation, wait for the final date for submission to pass, and then see if you win.
Then, it can be a while before funds are disbursed. It’s not beneficial if you need cash fast. At that point, a loan program is the wiser financial solution.
Business loans often get a bad rap, but they can be an incredible tool that propels your company forward. If you use the right type of funding correctly, you can grow, expand, and get out of unhealthy debt.
Yet, every loan option has advantages and disadvantages. Be sure you prepare for these risks that come with borrowing money.
Take Out a Loan With Caution
A business loan isn’t the most straightforward form of financing to get approved for. Owners can’t rely on their business credit; their personal financial history comes under scrutiny, too. The loan’s documents will likely state that the owner will be personally liable if the business doesn’t repay the funds.
Using your assets as collateral does increase your chances of obtaining a loan and can lower the interest rates you receive.
If you have any equipment, real estate, or accounts receivables, you can use as security, the lender sees you as a better risk for them. But if you can’t follow the terms of repayment, you could lose those assets.
All types of loans come with structured monthly repayment expectations. The fact that you need a loan could mean you’re struggling already.
Can you handle the extra strain on your budget, or might it be the straw that breaks your business’s back?
3. Other Funding Solutions to Consider
The good news is that loans and grants aren’t your only financial options. You need money faster than a grant can provide it, but you’re not willing to risk the harsh repayment terms of a loan.
Lines of Credit (LOC)
These financial solutions are available online or at a traditional bank. They’re easier to get approved for (and faster) online.
With an LOC, you receive a sum of money that