There are plenty of options available when considering a loan for your business. The most common are bank loans. The following are some advantages and disadvantages of taking out business loans from banks:
Advantages
Easily available
Being an established customer of a bank and the personalized customer service that comes with this may make it easier to ask for a loan. Banks are always available to help you apply for loans, as this is quite a common occurrence. Getting a bank loan may be an easier and smoother process than securing investors in your business.
Reasonable Interest Rates
Banks are constantly competing for customers and may offer deals that are similar to those of market competitors. There will always be interest rates attached to business loans, but these rates may also come with healthy profit rates. Nevertheless, the interest rate that you will get from the bank is better than that of a personal loan or other leading agencies. In some cases, the interest that you pay is deducted from your taxes, though this is not always guaranteed.
Nonprofit sharing
The most common reasons for taking out a business loan are to grow a business or to take it in a new direction. Both reasons share the common goal of wanting a business to prosper and gain more profit. If you borrow money from an investor, they will demand or expect some percentage of the profit that you make, along with the original money that was loaned. This does not happen when you take out a loan from a bank. The return amount is fixed. The bank does not care about your profit; all it wants is the original sum of money, plus interest.
Flexibility of Use
Unlike investors, a bank does not care how you spend the money that you are loaned, nor will it interfere with how you should run your business. Unless they are only silent partners, investors expect to have a say in how you spend their money on the business. A bank pays no attention to what you do, just as long as you return the money with interest. Business owners usually opt for bank loans in order to make sure that their business stays autonomous.
Disadvantages
Not All Businesses Qualify for a Loan
There are strict criteria that banks follow in order to approve business loan requests. Not all businesses are able to meet these requirements. It is crucial that you read the application thoroughly before applying for the loan. Do not waste your time applying if you know your business has no chance of being approved. Additionally, banks often prefer businesses that are already running, as there is a guarantee of profit, which ensures the money being returned on time.
Loans secured against insurance
Most banks secure loans on the real estate owned by the business. Therefore, there is always a risk of your property being seized if you fail to repay your loan. This becomes a big problem when your business is not making as much profit as you had hoped for and you are unable to pay the interest on time.
Lengthy application process
The bank verifies all credentials and details in order to make sure that the applicant and their business are eligible for the loan. Therefore, the whole process is very lengthy and exhausting. Banks may have a long list of requirements and conditions that are not always fulfilled by most businesses.
Entire amount not permitted
Banks often grant part amount of the money that is requested, as they may think it is unnecessary for the business to get the full amount. More often than not, banks approve only seventy or eighty percent of the required amount. This becomes frustrating for business owners who have already budgeted for how they are going to use the money. This forces them to reduce some expenses and make their plans fit within the parameters of the new amount.
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.
