It doesn’t take a finance degree to know that the current economy is tough. Unemployment rates are still at an all-time high, and many companies have gone bankrupt, while others are barely hanging on by a thread. In fact, in today’s ever-changing and fluxing economic climate, business loans are about the only option small business owners have for obtaining cash to further their companies. 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 720 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 getting low right now. As the liquidity of banks increases in the wake of the Note Ban last year, banks are increasing the rate at which they lend and interest rates will soon rise to compensate. A large loan taken out now or in the near future will have much lower overhead than will one taken out in two year’s time, making this the opportune time to plan expansion.
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.

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