Business loans serve different purpose for entrepreneurs. To some, it may be the best option of raising funds for capital and operational expenditures. But a good businessman will always know when it is a good time to get a loan or funds need to be raised through different means.

Here are some points you can look at before filling up that application.

Advantages:

  1. Accessibility

Businesses are usually connected with a bank who helps them with their finances. Convenience and accessibility of getting a business loan is better when the loan is done through bank partners.

  1. Low Interest Rates

Business loans are often offered with low interest rates. Loan packages that are offered by banks can be adjusted depending on the banks relationship with the client and the stability of the business.

  1. Proprietary Ownership

Getting a business loan is one of the ways of raising funds for capital or operational expenditures. One of the advantages is that the business is not subjected to profit or ownership sharing. When funds are accumulated from borrowing from venture capitalists, they become part owners of the business and share the profits being earned.

Disadvantages:

  1. Application Processing

Unless the relationship the business owner’s relationship with the bank is extraordinary, business loan application often takes a while to process. With all the paperwork and documentation that needs to be submitted, the processing time usually takes longer compared to other types of loan.

  1. Collateral Requirement

One of the requirements of a business loan is the requirement of a capital. Being a secured loan, the bank requires a collateral that is equivalent to the value of the loan. These collaterals can be properties or equipment owned by the business or owner. Once the loan has been approved, the business or the owner risks losing the property or equipment that has been placed on collateral.

  1. Restricted Cash

One of the important areas you need to address is making sure that the loan is paid. A source of income must be identified for loan payment or cash needs to be restricted to ensure that the business loan is covered. The downside is that this restricted cash could be used in other business matters that can help generate more income.