My dream was to open a restaurant. The business plan was really professional and I obtained my bank loan.
Unemployment rates are still at an all-time high, and many companies have gone bankrupt, while others are barely hanging on by a thread.
With an efficient business loan, almost any enterprise can see immediate growth as long as they use the additional capital wisely.
Reasons for a Business Loan Business loans are taken out for several reasons.
A company may want to secure financing to maintain business operations, invest in equipment, start a new branch, or any number of other motivations. Not only are these loans beneficial for burgeoning businesses, but they are normally easy to obtain as there are a multitude of lenders who willing to partner with business owners with a credit score of or higher, a stable income, and a decent business plan.
However the biggest advantage of taking out a business loan during tough economic times is that companies can use it to increase their working capital. While companies that are looking to expand often already have enough money to become larger, taking out a loan allows them to maintain their operating cash flow, making it easier for them to cover any unexpected expenses.
Thus, they are able to make payments on their loan by using the new income gained from expanding their business. Benefits Another benefit of getting a business loan is that, if the loan is lent to a corporate entity, the loan will not usually have to be repaid by the business owner if the company fails.
In the event of failure, the business is liquidated, which helps pay back part sometimes all of the funds borrowed.
Many business owners keep this advantageous aspect in mind when borrowing money because it is only the corporation that will go bankrupt in the event of loan default, not the owner personally.
What is particularly advantageous about seeking a business lone in the current climate is that interest rates are unbelievably low right now.
Ultimately, all business owners should evaluate their wants and needs before contacting a lender. This allows the business owner to see which type of lender is the best fit for their company. Similarly, it is crucial that business owners take the time to read the all of the terms and conditions accompanying any business loan they are considering.
There are often early repayment penalties associated with a loan and it is important to obtain a business loan that does not incorporate these penalties, as prepaying a loan in full can save a business a large amount of money in interest.
What to Watch Out For There are a number of things to watch out for when you decide to take out a business loan.
When your liaison at the bank presents you with your options, make sure that you understand the terms. Under no circumstances should you enter any agreement until you know it through-and-through: Remember also that your current bank is not the only one willing to lend.
With a little caution and patience, you can avoid most unforseen, negative consequences that might otherwise arise.
Is a Loan Right for you? Despite the drawbacks, business owners should keep in mind the many advantages a loan can present.
Expanding a business in the current economic climate could mean achieving far greater success once we bounce back from the recession, and the sudden, increased liquidity can help a business suffering under sudden expenses pull through until it can stand on its own feet again.
The main thing to remember when obtaining a business loan is to shop around for the best loan rates and always partnering with a lender who is trustworthy.
If you can secure a reasonable interest rate, payments, and the ability to repay the full amount at once, getting a loan just might take your business to the next level.
Kate Manning is a business major who has worked under others and as a self-employed entrepreneur. She currently owns and manages her own business in Washington State, and works as a content creator for Online Finance Degree Related Articles:With preparation, knowledge and these insider tips, you'll be able to create a business plan built for success for your startup.
Document that provides the essential financial and other information about the borrower on which the lender bases the decision to lend. For a business loan, it normally requires a detailed business plan that includes current and projected (usually for 3 years, or for the period of the loan) income statement (profit and loss account), balance sheet, and cash flow statement.
Financial Documents need to reflect the company’s history and project its future. This company has been in business for one year () and is seeking a loan.
the time to plan ahead, many pitfalls will be avoided and needless frustrations will be eliminated. Second, the business plan is a requirement if you are planning to seek loan funds. Use and Reprint Rights for Your FAST Business Plan Template This template has been written to include instructions for creating your final business plan.
You are free to edit and use the material within your organization. An executive summary of a business plan is an overview. Its purpose is to summarize the key points of a document for its readers, saving them time and preparing them for the upcoming content.