There are many ways in which your business could get a boost by taking out a loan for cashflow purposes. Here are some of the key potential benefits:
- Improved cashflow: A business loan can help you improve your cashflow by providing your business with a lump sum of money that you can use to cover expenses. This can be helpful if you are experiencing a temporary cashflow shortage or if you are looking to grow your business.
- Improved credit score: If you make your loan payments on time, you can improve your credit score. This can make it easier for you to qualify for other loans in the future and could also save you money if you are offered a lower interest rate.
- Quick access to funds: Business loans can provide you with quick access to funds that you can use to cover short-term expenses or unexpected costs.
- Flexibility: While business loans typically have fixed monthly repayments, you may be able to make overpayments (subject to a minimum amount set by the lender) when your budget and cashflow allow. This will reduce the term of your loan, meaning you pay less interest on the amount borrowed.
Of course, there are also some potential drawbacks to consider before taking out a business loan. It is important to make sure that you can afford the monthly payments and that you understand the terms of the loan before you sign anything.
Before you take out a business loan, make sure you have considered:
- Repayment terms: The length of time you will have to repay a business loan can range from a few months to several years, so you’ll need to be mindful of the need to make ongoing monthly repayments during the term of the loan.
- Personal guarantees: If you provide a personal guarantee on a business loan, you are personally liable to repay the debt if the business is unable to do so. It is important that you get independent legal advice to ensure you understand the terms of any personal guarantee required by a lender.
- Terms and conditions: If you breach any of the terms and conditions of a business loan, this could affect your business’s ability to borrow money again. For example, lenders will generally inform credit reference agencies when repayments are missed, so it’s important to understand the terms and conditions before you take out a loan and make sure you keep up to date with repayments.
Overall, loans can be a helpful tool for improving cashflow and growing your business. However, it’s important to make sure this is the right decision for you. If you ever find that you are in financial difficulty, you should let your lender know as soon as possible so they can work with you to find the best solution.
Find out more about business loans at LendingCrowd.