Most people assume a business loan is only for new businesses that are trying to get off the ground.
In reality, business loans are an important way for many well-established businesses to manage cash flow and expand their operations.
There are also a number of other reasons to consider a business loan.
Borrow larger sums
Many small businesses get off the ground with the help of something like a personal loan. However, larger businesses may need to access more funds than a typical personal loan would allow.
Although you can potentially borrow more funds, many business loans will require a business plan and detailed financials that outline how the funds will be used within the business.
Typically, business loans offer more flexibility than personal loans.
Flexile terms mean that you’re able to pay back a business loan at times that are more suited to the way your business operates and its cash flow situation.
Using a business loan also has an advantage compared to other forms of capital raising – such as taking on investors – as it allows a business owner to retain full control.
More appealing interest rates
Generally speaking, if a loan is secured it will attract a lower interest rate than a comparable unsecured loan.
For the most part, personal loans are unsecured, meaning they are not backed by anything and attract higher rates of interest.
If you take out a business loan through something like a company structure, in the event the business fails, you could potentially be shielded. However, a personal guarantee may be required.
While this is not the outcome a business owner is hoping for, it’s always worth seeking professional advice on how to best structure your business before looking at your loan options.