Pros and Cons of Business Financing
Major Benefits
You can build the financial credibility of your business by getting a business loan. With a good financial history, you can qualify for small business loans that have favorable terms and higher credit limits. You can also get more credit from your supplier. A business with a record of repaying its debts will find it easier to secure financing in the future.
Once you take a business loan, any interest, fees, and penalties that you pay related to the business loan are tax-deductible expenses. However, it is very important to separate personal and business expenses as it will make it easier for you when filing your taxes Small business loans have higher credit limits compared to personal loans. The amount approved is dependent on the financial history of the business and collateral you are willing to provide.
Watch Out For The Following:
You must have an incorporated company to qualify for a business loan. Business loans can be a costly affair for a startup. Some lenders will approve business loans to sole proprietorships but the terms may not be favorable due to low competition.
Business loans will generally take longer to approve compared to personal loans. The wait for a business loan is determined by a selected lender and the size of the loan requested.
It is very difficult for startup businesses to get approvals for a loan especially if they have not made an income. That said, entrepreneurs with strong business plans can get approvals for a startup loan.