04 Jun Business loan: when to look for it and when to avoid it
There are several situations in which the best option to boost your business is to make a business loan . However, the rates and high interest rates; large variations of terms; and the difficulty of obtaining credit when starting a business are factors that must be considered.
To help you to have security, we relate situations in which the business loan can be a good solution. Also know when it is necessary to flee from this alternative so as not to compromise your financial situation .
When to resort to the business loan
In some cases, that may be a viable option. Before starting with the search for financing sources, you must analyze your financial needs based on the business objectives. See below two situations in which the employer can resort to a loan.
Need for working capital
The business loan to obtain capital in turn is one of the most common in the financial market. This is because they are easy to acquire, since most financial institutions offer this resource to entrepreneurs.
It is used mainly in emergency situations , when companies need to increase cash flow and make capital rotate.
This type of loan usually has a short-term payment , although certain institutions offer a longer term of payment, and the values of the installments tend to be high, depending on the capital that the company needs.
One of the main advantages is the possibility of paying the installments in advance, which allows to accelerate the settlement of the debt and strengthen the credit history of the company, this will allow to obtain more credits in the future.
The approval of this modality is among the quickest options to acquire. In addition, it often has lower interest rates than other loans.
Anticipate cash for expansion
When expanding a business, a good option may be the business loan. However, some aspects should be carefully observed. It is essential to have a well-designed financial strategy , because poorly developed expansion can compromise the company’s finances.
Micro, small and medium enterprises have advantages to get a loan for the expansion of business. The best thing you can do is consult the options with your financial institution.
When to avoid the business loan
As we have seen, this can be a good solution for your business, as long as you can organize, plan and understand the advantages and disadvantages of this alternative. However, there are times when it is definitely not worth choosing the business loan.
If the company already has debts and the financial situation is complicated, maybe it is not the best time to resort to the loan. High interest rates are the main enemies.
Another pitfall is choosing a loan with long-term installment payments : at that point, it may seem like an adequate solution, but long loans can compromise the company’s planning and make it difficult to liquidate the debt.