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Small Business Loans - Business Expansion
It may be wishful thinking to envision business dreams and ideas
without any type of financing. While it certainly can be done,
most business owners find a time where business expansion is
needed, whether it be to purchase equipment such as printers,
computers, and photo copiers; to invest in products and services
needed to promote the business, including printed pieces,
promotional items, public relations, and advertising; or to
purchase something as straight-forward as inventory for a retail
business.
When getting a business loan, there are two clear options: a
bank loan or a credit card loan. While bank loans, in most
instances, tend to offer better interest rates, credit cards can
be beneficial if the balance can be paid in full in a short
period of time. Depending on the situation, both options are
good to consider.
Loans
A loan or other type of financing can bring growth and added
income to an existing business, or can be a valuable tool for a
start-up business, but also has the potential of becoming a
burden. Financing options need to be weighed carefully, so
before picking up the pen and signing on the dotted line,
consider the following:
- Is the interest rate reasonable? If not, consider a different
option such as refinancing your home for a cash-out payment.
Home loan rates are often much lower than business loans, and in
most instances, the interest is tax deductible, offering even
more benefit at the year's end. For this reason, check into both
options before deciding which is best for the business.
- What is the monthly payment, and how many payments are needed
to pay off the loan? If the term is longer than what you wanted,
or if the monthly payment sounds unreasonably high for your
business budget, ask for other options. Don't ever take a loan
that has high payments that will be difficult to take out of the
monthly budget. If payments are late or can't be made for even
one month, late fees will incur, credit scores will be affected,
and future loans may become difficult, or worse yet, impossible.
Loans are meant to be of assistance, not of nuisance. Don't
purposely bring stress into a business by financing more than is
affordable, even if it potentially means growth. Risk of this
nature is not always good. Borrow money slowly. Pay off one
loan, then if another is needed, move forward with another one.
Credit Cards
While not recommended for all business financing needs, credit
cards have their advantages in certain situations. Considering
the positives and negatives of credit cards is important for
business success, and using credit cards wisely is crucial.
Advantages of using a credit card as a loan source are as
follows:
- The interest can be lower. A lower rate on a credit card than
on a loan? It's definitely possible. There are many financial
institutions that will work hard for new customers. If your
credit scores are good, you may be eligible for this type of
credit card, and can consider something such as a zero percent
interest card. This zero percent interest rate is normally
available for up to six months, depending on the offer given by
the financial institution. If paying the borrowed money in full
during that particular period of time is planned, a credit card
of this nature may be the way to go.
- The money is available immediately. Bank loans can take time
to approve. Depending on the financial institution, a wait of
five to ten business days for the loan check to be cut is not
uncommon. Additionally, a waiting period is required in some
states once the loan is signed. If a credit card is already
available, and money is needed rather quickly for something such
as equipment repair or an emergency purchase, a credit card is
ideal. It's important to remember, though, that the credit card
should be paid in full as quickly as possible, not only to avoid
high interest rates and payments, but also to keep credit scores
as high as possible. Paying off a credit card quickly actually
increases credit scores, which offers empowerment for future
loans.
Investors
A third option for a business loan is to find an investor. This
is a wonderful way to bring money into a business for long-term
expansion and growth, or to develop a new product or service.
The downside, especially to sole proprietors who enjoy fully
managing the business, is that the investor becomes a part owner
of the business. However, investors can bring much needed income
to a business, without bringing in loan or credit card payments
and interest. Believe it or not, there are many people that are
looking to invest in a business. Investors can be sought out
quite easily.
- Talk to friends and family. Not everyone finds it possible to
work with family members, though if you're one of the lucky
ones, a friend or family member could be a wonderful investor.
The trust factor is usually high with those business owners who
feel a family member could have a positive financial impact on
the business.
- Network with others. Ask friends, family, and other business
owners, as well as people you see about every day - at the gym,
the grocery store, the post office. When the word is out that
you're in search of a business investor, it can be surprising
how quickly something like this can work out.
Choosing a Loan Source
In order for a business to succeed, it's extremely important to
choose the correct option for financing - a loan, use of a
credit card, or an investor. Write the facts down to properly
envision the business' needs, as well as goals for the business.
Talk to others. Research each idea individually. Do your
homework. Think things over carefully. Review business budgets.
Take the time needed to make a wise financial decision. By doing
so, the business will be affected in a positive way.
About the author:
Rebecca Game is the founder of Digital Women ®, an online
community for women in business. A 30 year entrepreneur and
dedicated to helping other women. Visit her site: Loans for
Women
http://loans.digital-women.com