While you may think that bank loans are only intended to help big businesses and corporations, the truth of the matter is that they can also come in handy to entrepreneurs who want to get their own business started, but lack the capital to do so. There are many benefits to getting a bank loan, as they provide entrepreneurs with the working capital they need to be successful in business. Here are 10 reasons why getting a bank loan is such a great idea for your business.
1) Build Credit
Borrowing money, both personally and for your business, is much easier when you have solid credit. If you’re just starting out and don’t yet have an established record, borrowing from banks can be difficult because lenders may not know enough about you to determine whether or not you’re a good bet. One way to build that all-important credit history is by applying for a small personal loan from your local bank.
2) Build Relationships
From conversations with your banker to joining alumni groups at your alma mater, there are many ways to build relationships and strengthen ties in your professional network. Once you’ve secured a loan or line of credit, be sure to stay in contact with your lender—they may have information about other opportunities that fit your needs. And while they aren’t able to pull strings for you, they can point you in right direction.
3) Save Time
One of the greatest benefits of getting a bank loan is that it can get you funding quickly. If your business needs capital right away, and you don’t have time to save up or wait for an investor, getting a bank loan can help to speed up your growth. Even if you already have plenty of cash on hand, getting access to funds quickly can be helpful when you need to make large purchases or scale up staff during seasonal buying periods.
4) Improve Income Potential
If you’re starting a new business, getting an SBA-backed loan can help you to establish your credit record, which in turn can help increase your income potential. Even if you’re starting on a small scale, even with just one employee and some cash reserves, getting approved for an SBA-backed loan is still going to be worth it—even if you never use it.
5) Diversify Your Financial Portfolio
The less reliant you are on one source of income, whether it’s your business or personal salary, or any other source, for that matter, in case something goes wrong with one source (such as an illness), then you’re diversified and protected from risk. A loan from a bank can help diversify your financial portfolio by giving you immediate access to working capital.
6) Invest in the Future
Whether you’re purchasing supplies to start your own business or paying for school, a bank loan can be an invaluable investment in your future. In fact, most people don’t realize that getting approved for a loan can help build your credit. Instead of putting things on hold until you have enough cash saved up, reach out to your local banks and lenders for more information about applying for loans today. When it comes to investing in your future, it pays to go with what you know!
7) Access Different Types of Loans
Whether you want to purchase property, finance new equipment for your business, pay for college or support your lifestyle, banks offer loans that can help you achieve all these goals and more. Although credit scores and income are important factors in getting approved for any loan, it’s not always easy to acquire financing when you’re self-employed. If you own an established small business with steady cash flow, however, a conventional business loan might be within reach.
8) Have More Money to Spend Now
One of the biggest benefits to getting an unsecured bank loan is that you can take all or most of your funds right away, so you’ll have more money to spend now. The longer it takes to get approved for a loan and get your money, the less cash you’ll be able to use immediately. But with unsecured loans, you can start spending as soon as everything is final.
9) Starting a Business? Take Out a Business Loan Instead Of an Equity Investment!
If you’re looking to start a business, you may be considering taking on equity investment. That is, selling part ownership in your company for cash in exchange for funding. In fact, you might have no idea what else there is to consider; after all, who wouldn’t want to raise money by selling off part of their company? Yet many entrepreneurs eventually come to see that taking out a loan is often more advantageous than taking on equity investment.
10) Get out From Under Debt with Bankruptcy Protection
In an ideal world, you should keep all your debts paid off. You’ll get to keep your credit score high and not have to worry about financial mishaps like missing payments or bounced checks. However, life doesn’t always work out that way. If you fall into hard times and can’t keep up with payments, bankruptcy might be right for you. If that time comes, be sure to know what options are available to you; some are better than others!