Advantages And Disadvantages Of Small Business Loans

By Jose Nelson


All businesses will need some certain amount of money as start ups. Thus, the entrepreneurs will need to work out to be able to get an access to having sufficient funds. So the first option for them is the bank. Banks in Boca Raton are considered as the most commonly approached when talking about funds and this is done through loans.

Loaning from a bank to finance a small business is not that easy. Before loaning, there are some pre requisites that need to be considered and followed. There are really a lot of applications that have been rejected, and these rejections cannot be avoided. Some regulations in the banks are tough and these can be phenomenal especially for small business loans Boca Raton.

The advantages. Accessibility and convenience. Banks are accessible anytime because people are using them regularly to perform deposits and withdrawal of savings. These are also convenient, specifically for older customers because they can be provided with personalized services. They are also offering multiple options or schemes to entrepreneurs for setting up businesses. These include term loans, standard businesses loans, etc.

Not sharing the profits. Venture capitalists and also angel investors may agree to give the loan, but this is in exchange with part ownership. This means that they have their rights in making decisions and sharing with the profits. But for banks, this agreement is not being offered. Partial payment of installment and getting the interests are their only interest.

Low interest rates. Though getting these can be tough, lower rates will still be provided by banks unlike other lending agencies or instruments including credit cards. Tax benefits are being offered. A lot of small businesses are enjoying to have relief from paying taxes since the percentage of profit for loan repayment is exempted for tax.

The disadvantages. Long application processes. A bank will need to conduct some further investigations and verification for all details and other credentials of a business before a loan will be sanctioned. So therefore, the application process would take longer and as well the review process. Cumbersome. Detailing may sometimes becomes unmanageable for banks and unnecessary for entrepreneurs.

Preferences are given to existing businesses. Running businesses are mostly preferred by most banks because they can be able to gauge the credit history and the profitability before a loan is sanctioned. Qualification of pre requisites. Before clearing, businesses are required to undergo a lot of prerequisites and conditions. These may sometimes be difficult to meet.

Risk to lose collateral. Generally, loans from the bank are being sanctioned against a collateral. The collateral may either be the house or any property of an entrepreneur. So the most possible result of this would be having the risk of failing the business.

The whole amount is sometimes not granted. An entire loan amount may not be possibly agreed or granted by the bank. Usually, 70 or 80 percent only of requested amount will be given. The entrepreneur will surely have some difficulties of looking for other agencies to provide additional funds. In conclusion, this balancing pros and cons prompted people on still approaching a bank.




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