When they first start out, many businesses can be apprehensive to take out a business loan. It is no secret that the word ‘loan’ often comes with negative connotations. Plus, when you are starting a business from scratch, people often try to keep their expenses to a minimum. But is this an effective method? The truth is business loan success stories are far and wide because having capital behind a business is what will actually get it off the ground. But, with the right intentions and knowledge, business loans can lead to success.
What Is a Business Loan?
There are plenty of different types of business loans out there, so it is important to choose the one that is right for your business.
You can choose from a secured loan or an unsecured loan.
where you offer up an asset as collateral against your loan. The good part of a secured loan is that they charge a lower interest rate, making it cheaper for you. On the flip side, there is a lot more risk involved for you if you have trouble repaying the loan.
These are where you offer up nothing against the loan. As you can understand, these are a lot more risky for lenders, so as a result, they come with much higher interest rates. This can make it much harder for you to pay back the loan.
Can Business Loans Lead Me To Success?
That depends, how serious are you about making this business work? Is it is a passion project that you do in your spare time to make a few extra dollars? If so, it isn’t likely that a business loan can lead you and your business to success.
On the other hand, maybe you have quit your day job and poured your blood, sweat and tears into a start-up. In this case, you must ask yourself: “what’s stopping me from taking out a business loan?”. The saying goes, you need to have money to make money, and it is so true. With a business loan, you have this money available to you to make things work. Therefore, if you have the right attitude, coupled with a good plan, then business loans can lead to success.
Is It Hard To Take Out A Business Loan?
In short, yes. But don’t run away scared. The fact it is hard to take out a business loan is a good thing. It really makes you think your business through. You will be detailing exactly where your business is at and putting in place a business plan to show the potential lender exactly how your business model works and how you plan to make money.
A business plan is essential for any new business, so taking out a loan is a great opportunity to take a step back and have a look at your long-term goals.
Having a detailed plan in place will also ensure that your lender steers you in the right direction for the type of loan you need.
Here are some questions to ask yourself before taking out a business loan:
- How much do I need to borrow?
- What type of loan would best suit my needs?
- Can the business afford to repay the loan with the plan in place?
- What security can I offer the lender?
What Steps Are Involved to Secure a Business Loan?
1. Decide whether a loan is right for you
If it is, what purpose will it serve in your business? Without a clear purpose, the money will get eaten up into the business without actually helping it in the long run.
2. How much do you want to borrow?
While you may be eligible to borrow a large amount, does this financially make sense for your business and will you be able to pay it back?
3. Decide between a secured or unsecured loan
One comes with a lot more risk, but the other one is much more expensive.
4. Choose a fixed or variable interest rate
A fixed-rate gives you a bigger degree of certainty, but you may end up paying more. Variable you have the chance to pay less depending on rates, but it is a gamble.
5. Take a look at any fees involved
These can add up in costs and be detrimental if they aren’t factored in.
6. Start on the paperwork
As mentioned, there is lots of paperwork involved from getting a business plan in place to other documentation, so check out what is needed before applying.
So, if you are confident that business loans can lead to success, then get started today. ALC Commercial can give your business the boost it needs.