Business Loans

Business Loans

Trying to start or maintain a business can be incredibly trying. It’s believed that around 20% of new businesses fail within the first year, and 50% when that’s increased to 5 years. Whilst some businesses may be doomed to fail, for others, the difference between survival and closure is some financial help. At times, there’s no replacement for a well-suited loan. They’re not just a crutch when you can’t think of another financing option, they do help businesses thoroughly.

Let’s look deeper at the positives of business loans and how they can help:

The benefits

The benefit of a loan as opposed to other methods of business funding is the potential for flexible repayments. The size of the loan is dependant upon the size of your business. The repayment terms will vary depending on the nature of your business and the ability to pay the loan back. The finer details you will be able to discuss and agree with the lender. Here are some facts and figures about business loans:

  • Almost a third of small and medium business reported being partially financed by loans in 2018.
  • 73% of smaller businesses would rather put off potential growth if it meant not getting a loan.
  • There has been a general decline of small businesses using external finance.
  • Awareness of traditional forms of funding is continually on the rise.
  • The value of business loans increases year on year by around 3%
  • The projected cumulative value of business loans in the UK in 2021 is set to be £437 billion.

 

What can a business loan do for you?

You might have a brilliant idea, an ideal niche in the market, great staff, perfect premises and all the potential in the world. No business is bullet-proof. The right loan can take you from a position of risk where a rough-patch may make you have to shut down, to relative security. If the market changes quickly, you can take the hit. If a valuable member of staff leaves you can afford to find a replacement. If you’re just short of making ends meet, a loan can make it up the difference. And if you just need to absorb a big bill, you can do so.

Potential downsides

The most obvious disadvantage would be that you are unable to repay a loan for one reason or another. Depending on the terms of the loan, this can put you in serious financial jeopardy and may put an end to your business, or worse. When seeking out a loan, always look for one with suitably flexible repayment terms and one that you can reasonable expect to repay.

Aside from this, there’s no guarantee that the actual terms of the loan would be better than another form of lending. There are so many forms of lending out there that you are likely to find more favourable terms elsewhere. And different form of funding suits different businesses better too.

For a smaller business, a loan may be difficult to obtain, especially if you;re considered a higher risk business. You may be made to jump through hoops to prove that you are worth investing in; perhaps getting credit checks, getting a certain level of security or demonstrating certain features that prove the size and capability of your business. It’s not always an easy route.

Last Thought

Don’t see a business loan as an easy solution for getting financing as a small business. It’s a very real responsibility that you have to repay, and not doing so can put you in a very difficult position. Similarly, don’t reject it just because of the threat of not being able to repay. What can hinder many new businesses is simply not having the capital to make the changes they need early on to advertise, buy stock, etc. If you know you have a good idea and you have plenty of determination and self-belief, it can make all the difference between success and failure.

Other Resources

https://consumer-rights.org/news/business-banking

https://consumer-rights.org/news/merchant-cash-advance

https://consumer-rights.org/news/invoice-discounts

https://consumer-rights.org/news/simple-b2b-invoice-payments

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