Fortunately, bank loans are just one of the many options available for small businesses to raise funds. The decision of where to secure funds still depends on the balance between the pros and cons of getting a loan. Like every other source of funds, bank loans come with their fair share of advantages and disadvantages.
Pros of Bank Loans
- Accessibility and Convenience. Banks are always accessible since they are regularly used for savings. After being bank customers for years, it becomes convenient and familiar, making it the first place to consider procuring funds.
- Various Loan Options. Banks offer different types of schemes to woo their clients. A bank’s real earnings come from the loan interest. Options like standard business loans, term loans, and others may be offered to entrepreneurs.
- Lower Interest Rates. Although lower rates are tough to secure, banks may offer loans with lower interest rates than other lending institutions and instruments.
- Tax Benefits. Small businesses procuring loans from banks may get tax relief since the percentage of profits used for loan repayment is tax exempt.
- Non-profit Sharing. Venture capitalists and angel investors agree to offer loan in exchange for part ownership, profit shares, and the right to influence decision making.
Cons of Bank Loans
- Lengthy Process. Keep in mind that banks still need to verify your credentials before loaning money. Thus, its application process can be long because its review and evaluation take a long time.
- Many Prerequisites. Banks often have a long list of conditions before they clear the loan. It may sometimes be impossible to meet them.
- Collateral. Bank loans often require some form of collateral - often it’s the entrepreneur’s house or property. They are at risk of being lost should you fail to make your loan payments.
Although bank loans can be difficult to procure for some, it is still worth a shot. As soon as your loan is granted and your business takes off successfully, make sure you protect them with the right insurance.
Wellcovered Insurance Group has a team of insurance agents that will help you find what you’re looking for in business insurance. Our agents can help you customize your policy according to your needs and budget. You may get a free quote from us today. Call us at (386) 218-4951 or visit us at our office.