Pros and Cons of Taking Small Business Loans from Banks

Small Business Loans from Banks - Complete Controller

There are plenty of options available when considering a loan for your business. The most common are bank loans. The following are some advantages and disadvantages of taking out business loans from banks: Check out America's Best Bookkeepers


  1. Easily available

Being an established customer of a bank and the personalized customer service that comes with this may make it easier to ask for a loan. Banks are always available to help you apply for loans, as this is quite a common occurrence. Getting a bank loan may be an easier and smoother process than securing investors in your business.

  1. Reasonable Interest Rates

Banks are constantly competing for customers and may offer deals that are similar to those of market competitors. There will always be interest rates attached to business loans, but these rates may also come with healthy profit rates. Nevertheless, the interest rate that you will get from the bank is better than that of a personal loan or other leading agencies. In some cases, the interest that you pay is deducted from your taxes, though this is not always guaranteed. Check out America's Best Bookkeepers

  1. Nonprofit sharing

The most common reasons for taking out a business loan are to grow a business or to take it in a new direction. Both reasons share the common goal of wanting a business to prosper and gain more profit. If you borrow money from an investor, they will demand or expect some percentage of the profit that you make, along with the original money that was loaned. This does not happen when you take out a loan from a bank. The return amount is fixed. The bank does not care about your profit; all it wants is the original sum of money, plus interest.  

  1. Flexibility of Use

Unlike investors, a bank does not care how you spend the money that you are loaned, nor will it interfere with how you should run your business. Unless they are only silent partners, investors expect to have a say in how you spend their money on the business. A bank pays no attention to what you do, just as long as you return the money with interest. Business owners usually opt for bank loans in order to make sure that their business stays autonomous. 


  1. Not All Businesses Qualify for a Loan

There are strict criteria that banks follow in order to approve business loan requests. Not all businesses are able to meet these requirements. It is crucial that you read the application thoroughly before applying for the loan. Do not waste your time applying if you know your business has no chance of being approved. Additionally, banks often prefer businesses that are already running, as there is a guarantee of profit, which ensures the money being returned on time. Check out America's Best Bookkeepers

  1. Loans secured against insurance

Most banks secure loans on the real estate owned by the business. Therefore, there is always a risk of your property being seized if you fail to repay your loan. This becomes a big problem when your business is not making as much profit as you had hoped for and you are unable to pay the interest on time.

  1. Lengthy application process

The bank verifies all credentials and details in order to make sure that the applicant and their business are eligible for the loan. Therefore, the whole process is very lengthy and exhausting. Banks may have a long list of requirements and conditions that are not always fulfilled by most businesses.

  1. Entire amount not permitted

Banks often grant part amount of the money that is requested, as they may think it is unnecessary for the business to get the full amount. More often than not, banks approve only seventy or eighty percent of the required amount. This becomes frustrating for business owners who have already budgeted for how they are going to use the money. This forces them to reduce some expenses and make their plans fit within the parameters of the new amount.

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