Business Loans Explained
A business loan is borrowed capital that a company puts toward expenses it can’t afford on its own. Maybe you have an amazing idea for a startup but don’t have the funds to get it off the ground. Perhaps you’re looking to expand your newly thriving business but find yourself without the cash to make it happen. It may even be the case that you just need the money to help your company get by with day-to-day operations while profits are low.
There are a variety of reasons that businesses will turn to debt financing to help them achieve their objectives. But the one commonality among them all is that a business loan is an opportunity for that business to attain success.
The nature of a loan is that it must be repaid to the lender in accordance with the loan’s terms and conditions, which include, among other things, a payback period, what the lender will be using as collateral, and the interest rate. With respect to interest, lenders will charge either a fixed rate of interest (meaning the rate remains the same throughout the life of the loan) or an adjustable rate of interest (where the rate fluctuates based on a variety of factors).
In today’s marketplace, there are numerous funding options available to businesses. While conventional bank loans are a popular source of funding, they simply are not viable for every organization. Many banks are making their requirements more stringent, requiring the prospective borrowers to produce business and marketing plans, budgets, and forecasts. This can be a time-consuming process. The result is that it has become increasingly difficult for businesses to receive financial assistance from commercial loans.
What’s more, traditional bank loans are typically for a fixed term with a minimum of 1 year and can last several years. This may not be the best option for someone whose needs would be better suited to a short-term business cash advance that is paid back over a period of months instead of years. This is especially true when you consider the fact that bank loans often come with a prepayment penalty (meaning the bank charges you a fee for paying back your loan in full early).
Other financial solutions available to businesses include credit unions, loans made using accounts receivables or inventory as capital, and home equity lines of credit if the owners of the company are homeowners.
Why get a business loan?
Many companies look to debt financing to manage their operations, and the reason is almost always the expectation that by doing so, they can improve their bottom line. Below are some reasons you may be considering taking out a loan for your business.
You want to expand operations.
Is business going so well that you’re considering either purchasing real estate, leasing a larger space, or adding an additional location? Business loans – such as term loans – can help you cover the hefty, up-front costs that accompany expansion when you don’t have the funds on hand to do so.
You need the cash flow.
For small businesses in particular, it can be difficult to keep day-to-day operations running while profits are low. Borrowing money increases your working capital, which can then be put toward expenses such as rent, utilities, inventory, and staff – the necessities that keep your business afloat. As your business grows and your assets begin to make money, you can repay the loan.
You want to build credit.
It may be wise business strategy to take out loans early on in the life of your business. If you’re planning to apply for large-scale financing at some point in the future, you can start to establish your business credit – as well as a relationship with a specific lender – now, through smaller, short-term loans.
You want to purchase inventory.
Depending on the type of business you have, you might need to purchase more inventory at certain times than others. For example, if you have a seasonal business that booms during the holiday season, you likely need to make a large purchase right before the holidays. If you don’t have the money to do so, a business loan can set you up for success by allowing you to make that purchase.
You’ve got a business opportunity that you can’t – or shouldn’t – pass on.
Whether it’s extremely low rent on a coveted space, high quality inventory at a fraction of the cost, or fresh talent that would make all the difference to your business, sometimes an opportunity comes up that the entrepreneur in you instinctively knows you need to act on. If that opportunity outweighs the potential debt, a loan can help you seize it.
You want to purchase equipment.
Loans are an excellent means to financing equipment you need for your business. What’s more, the equipment purchased can serve as collateral for the debt.
Other Useful Resources By Plousio
- What is a business loan?
- Credit Score Explained
- Why borrow money to purchase business equipment?
- Business Loan Underwriting Explained
- Interest Rates & Factor Rates Explained
- Why business loans get declined
- Business bank account requirements for loans
- Preparing for a business loan
- Getting approved for a business loan
- How to qualify for a business line of credit?
Business Loan Products From Our Marketplace
How Does Plousio Work?
Plousio makes it easy to find a great small business loan with the most competitive rates. Simply answer a few questions, select a lender and fill out our account creation form and you’ll start receiving new offers right away! With 3 easy steps, you can get your death care business funded!
Step #1: Apply online or call 1-508-848-0534
Step #2: Receive the most competitive offers
Step #3: Get funded within 24 ~ 48 hours
Contact a Plousio Funding Adviser Today
If you need help with determining your funding eligibility or preparing application and documents, please contact our funding adviser today. Plousio funding advisers pride themselves in transparency and non-aggressive communication practices. They are not here to make sales quotas, instead, focus on helping you every step along the way of your funding process. In the unlikely event, you do not think that Plousio is the right solution for you, just let us know – No problem! We promise we wont be calling you 5 times a day like some other companies do.