Are business loans really worth getting? That may seem like a silly question if your business is in need of capital, but some people have reservations about getting loans. You’re using debt to finance your business, and it has to be repaid to your creditor with interest. Some business loans even require collateral in the form of your business assets or even personal assets to secure them, and if you fail to repay the loan, the creditor could seize them and liquidate them to pay off the amount owed. There definitely is a risk that comes with getting a business loan, but it’s certainly worth it because it’s also a catalyst to business success if used right.
1. You Can Purchase More Inventory With A Business Loan
If customers are buying your products in high volumes, you’ll want to be able to purchase enough inventory to meet their demand. Business loan financing can allow to purchase very large quantities of inventory and stockpile it so it’s ready to go once customers order it. Of course, you should be careful not to over purchase it, but if sales are surging because of your products, that’s revenue made that can then pay off the loan and then some.
2. You Can Get An ROI On Marketing Spending
Marketing your business has to be done in order to attract customers and let them know where you are, and business loans for small business owners can help pay for that if you need the extra capital as marketing can be expensive. According to the experts at Lantern Credit, “If working capital is low or negative, you may find it helpful to receive funding to cover expenses that are essential to remaining successful.” If you’re paying for well put together marketing campaigns, or media that is bringing in website visitors or in-store visitors and generating sales, the loan will have made a good return on investment in the way it was spent. You do want to be sure to do market research as well to make sure you’re going to get your ROI.
3. You’ll Build Your Credit
Getting a business loan and paying it off will improve your credit a lot and make you less risky for future financing. But on top of qualifying for more kinds of business loans, you’ll also qualify for much lower interest rates. The lower your interest rates, the more affordable your loan will be, and the lower your monthly payments will also be.
4. You Won’t Be Selling Equity In Your Business
Business loans are just simply money you’re borrowing, and not direct investments in your business. If you finance your business through equity, or in other words have investors buying into it, you’re essentially giving them pieces of the ownership in it. While that may not be a big deal for some entrepreneurs, others may not want other owners having a say in how the business will be run. With business loans, the lender doesn’t buy any equity in your business; they only want their money paid back.
At the end of the day, most business loans are worth it provided they don’t charge sky high interest rates. But you do need to make sure you spend the funds from business loans wisely and have a plan to exit them whether or not your business succeeds.