All successful companies have started with a good idea. But one cannot do business solely on good ideas, so typically something more has been followed – capital.

If you are passionate about your business as an entrepreneur, but may not quite have enough capital to get started on your own, or for that matter, develop the concept further, then you might need a business loan.

As with all other loans, there are pros and cons to taking out a business loan.

We will take a closer look at this and give some suggestions as to when it can respond – and when it cannot. In order to create an extra good overview, there are also possible other avenues you can use, eg. alternative raising of capital in the form of e.g. crowdfunding or P2P loans.


We provide online small business financing loan

Benefits of a business loan

The immediate benefit of an online business loan via this resource from https://oakparkfinancial.com/, of course, is that it allows your business to expand and grow – whether you need a business loan for a startup or you, for example, needs to invest in multiple machines or similar, to match demand.

In addition, it is, of course, more advantageous to take business loans instead of having to personally foreclose on the loan – keep company-related things in the business above all else. In addition, you may also be fortunate that the bank has more flexible requirements in relation to the corporate loan.

 

Types of business loans

Types of business loans

Of course, there is never ‘one size fits all’ and there are now many loan providers on the market with various loan offers. Here is just a sample:

  • The classic bank loan with installment after eg. the serial or annuity principle
  • Secured business loans
  • Unsecured corporate loans
  • Interest rate swap loans
  • , etc.

 

When Should You Not Take a Business Loan?

When Should You Not Take a Business Loan?

The loan market is chock-full of seemingly ‘good deals’ these days and if you are too over-eager or don’t read it too much, you can quickly end up in trouble.

First and foremost, always make sure that the loan offers you receive are completely non-binding, so that you have a real chance of being able to consider the offer. That is the first step.

After that, you must also consider interest rates, APR, miscellaneous fees and of course the maturity. It is clear that the price of the loan will increase if you need a very long maturity, so it is crucial that you have a clear strategy for your business and what the money is going to be used for.

If you do not yet feel completely secure in your business and think that a long maturity can give you more elbow room to get paid off, then you need to be careful.

In general, you need to be very conscious of your business loan basis. If you do not have much experience, then it is a bad idea to bet everything (though it can be tempting) and throw yourself into the project full time.

Instead, consider continuing with e.g. a fixed salary until you have a better impression of the company’s potential.

 

FACTS: SECURED AND UNSURED LOANS

FACTS: SECURED AND UNSURED LOANS

Secured loans are the most common ones that cover loans where there is a collateral requirement. In contrast, the so-called unsecured loans have no collateral requirement (other than income and credit requirements) – at least at first glance. However, there are many loan companies that instead require personal liability for it (most often part of it with small print) and thus it is therefore also a significantly greater risk to run.

 

When is it a good idea to take out a business loan?

This could happen, for example, when you are already starting to generate revenue in the business and it has a healthy economy and may need additional capital to be able to follow the expansion.

It may also be that you have a special knowledge of the niche in the market you have found and therefore have sufficient knowledge of how your business can run – then a small loan may well be worth getting started.

However, it is always an individual assessment and there will always be advantages and disadvantages to taking out a business loan, regardless of the type of loan.

 

Alternative roads

If a business loan isn’t exactly the answer for you, then there are other ways you can go to raise capital for your business. It’s just about being creative.

Maybe the solution is to set up your business on Kickstarter or similar and pitch your idea to the many thousands of users who can then choose if they want to support you.

In the past few years, many crowfunding platforms have also been added, such as Mintos, Peerberry and many others, where people invest in lending to businesses. Interest rates are slightly higher here as there is a certain risk involved, but this is also a way to go.

In addition, the EU also has a number of opportunities for smaller companies. The EU has the Enterprise Europe network which provides advice and support, and the EU also provides funding for businesses. You can read more about this here.

However, if you have a solid network yourself, it may also be worth considering whether your family or friends might be interested in investing in the business.

These people know you and your work ethic (as well as a passion for the idea) well, so they may be willing to support and maybe even make a good profit on it if your business is successful.

It’s worth reaching out to the network as part of your business loan considerations to fund your business.

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