Advantages and Disadvantages of a Business Loan

If you are a business owner, sooner or later you will need to make a business loan for whatever purpose you may identify. There are instances that you hear how good it is to have made a business loan as it helped them pull the business up from the brink of failure. On other hand you may here others who may disagree that business loan can cause you more problems.

In deciding if you really need a business loan, here are a few advantages and disadvantages that can help you.

Advantages:

  • Build Your Capital. Whether you are an existing business establishment or a new business starting its operations, a business loan is a good way to build your own capital without needing investors who will have ownership over the business.
  • Grow Your Business. With proper planning and execution, business loan can greatly help you in growing your business. It can address the expenditures for increasing your inventory or cover the expenses of setting up a new shop. A business loan can cover these factors that will ensure your business to move ahead.
  • Consolidating Loan. A business loan can be used for consolidating all the loans an existing business may have. If the business requires simpler monitoring of all its debts, it is a good strategy to consolidate your loan under a single one. It will allow you to have one due date to monitor, one amortization payment to track, and even have one lender to talk to.

Disadvantages:

  • Limited Amount. Unlike sourcing your funds from investors, the amount you can borrow can only amount to as much as you are qualified for. You have to look for other ways to find additional money if the loan that has been granted to you is the maximum qualified amount.

Long Term Obligation. Like with any other loan, having a business loan will mean commitment to a long-term obligation. You need to ensure that you have plans on how to support this long term obligation which the business will need to liquidate.