10 Small Business Loan Benefits You Might Not Know About
There are many loan options on the market offered by different lenders, so you should take time to find an option that best fits your needs.
In the post, we’ll take a closer look at ten small business loan benefits.
The Top 10 Business Loan Benefits:
1. Launch Your Business
If you’re ready to start your business but are short on cash, a small business loan can help you do so. In some cases, you may get approved for a significant amount of money so that you can open your doors without worrying about how you’ll pay for initial startup costs.
However, you shouldn’t borrow more than you need, or you’ll steer your business into a cycle of debt. In many cases, it’s best to wait until your business is operational for some time, then pursue a business loan.
2. Expand Your Business Operations
One of the most notable benefits of a business loan is that it can allow you to grow your business operations. Using your financing, you can expand to new customers or geographical areas and grow your business.
3. Build Your Business Credit
With a good business credit score, you may get approved for a variety of financing options in the future. If you’re a startup or newer business, a small business loan can allow you to build your business credit. As long as you make your payments on time and in full, you’ll be able to achieve a strong score.
4. Purchase Equipment
Chances are your business needs equipment to operate, but because equipment is fairly expensive, it can be hard to afford. However, a small business loan can cover the cost of new equipment, so that you don’t have to take away funds from other areas of your business.
If you have outdated equipment, it can also provide you with the funds to upgrade it.
5. Purchase Inventory
If you have a seasonal business, you may want to use a loan to purchase inventory. For example, let’s say that you’re a swimsuit retailer and earn most of your revenue during the summer months. Using your loan, you can invest in your inventory in the winter to prepare for the busy months ahead.
6. Save on Taxes
There’s no denying that business taxes can get expensive, but it’s imperative that you pay your taxes on time. Otherwise, you’ll risk your business’s financial health and overall future.
With a small business loan, however, you can save on them because the interest that you pay is tax-deductible. If you’re concerned about the interest rate changing during your loan term, opt for a fixed-rate option.
For more details on the tax benefits of a small business loan and exactly how much you can save, consult a tax professional or CPA.
7. Develop a Relationship with a Lender
When you take out a small business loan, you can develop a relationship with the alternative lender or other loan provider. This will make it easier for you to get financing in the future, especially if you repay your original loan on-time.
8. Solve Cash Flow Issues
If you have cash flow problems, a small business loan can assist. It’s particularly useful if your cash flow is sporadic or inconsistent.
Often, business owners use business financing to maintain positive cash flow, afford consistent expenses, reinvest in your business, and provide a buffer against financial challenges in the future.
9. Cover Emergency Expenses
Every business is prone to emergencies, but borrowing money from a lender can help you survive tough times. Most recently, many business owners have required additional working capital sources during the COVID-19 pandemic.
In addition to the pandemic, your business could experience other emergencies that require a loan. For example, if the water heater in your building breaks down, it’ll require a costly repair or replacement. Once you have a business loan, you’ll be able to cover emergency expenses like this with ease.
10. Sustain Your Business During Slow Times
If you have a seasonal business, a small business loan may come in handy during your slow season. Often, seasonal businesses utilize their financing for costs such as:
- Equipment upgrades
- Marketing expenses
Top Small Business Loan Options
If you’d like to reap the benefits of a small business loan, take time to consider how you’ll use it. Maybe you hope to open more locations, or perhaps you’d like to get your business idea up and running or upgrade outdated equipment.
Once you evaluate your business plan, it’ll be easier to determine the small business loan option that you should pursue. For example, a short-term loan may make sense if you’d like to borrow a specific amount of money upfront and pay it back in less than a year.
On the other hand, long-term loans are beneficial for business owners with longer term financing needs, that can handle making loan payments over a longer period of time.
Other business financing options include:
- SBA Loan Programs: The SBA provides loan approvals to businesses that can’t get approved for funding elsewhere. Their most popular programs include SBA 7(a) loans, 504 loans, and disaster loans. Although the SBA guarantees a portion of each loan, the financing is actually facilitated through a lending partner.
- Equipment Loans: If you need funding for an equipment purchase or repair, pursuing an equipment loan is a great option.
- Business Bank Loans: As you likely know, banks provide loan, but they’re often fairly expensive and come with a long application process.
- Loans From Alternative Lenders: At Fora Financial, we provide business loans to small businesses spanning a variety of industries. If you’d like to learn more about our business funding options, click to the link below to get your free quote!
Conclusion: Support Your Business with a Small Business Loan
Now that you know the benefits of a business loan, do some research and compare all your options.
Before you move forward with a loan, read and agree to the fine print, then come up with a plan for how you’ll repay it. If you’re ready to learn more about business loans, click the link below to receive your free quote from Fora Financial!
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.