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Should You Apply for a Business Loan for Your Small Business?

Do you want to grow your business? You're probably going to need a lot of money, and you may be dreading getting a loan. But loans aren't all bad, and they're not the only option you have. Keep reading to learn how you can raise money for your business.

Pros of a Business Loan

Getting a loan for a small business can be an excellent way to get the money you need. You can use the loan money to hire more people, open a second location, or place a bulk order of products. Depending on where you get the loan, you can get the cash within a few days, so you don't have to wait a long time before making those big purchases. When your business does grow, the lender can't eat into your profits, and you can even deduct your interest payments from your taxes.

As long as you don't take out too much money or get a loan with a high interest rate, it can be a smart financial move for your business. But you should be careful so that you don't get yourself into debt.

Cons of a Business Loan

While business loans can be helpful, they aren't always the right choice. For one, you may need to provide a lot of information about how your business operates. You may need to show proof of income or revenue so that the lender knows they can trust you to repay the loan amount. And if you can't show that, you may not be able to get a bigger loan or one with a lower interest rate.

Interest rates may also not even be up to the lender since the government can control those. And even if the lender sets the interest rate, they may also require some form of collateral. If you don't pay your loan back, the lender can take possession of your car or home, for example.

Dip Into Your Savings

Luckily, a loan isn't your only option for funding your small business. If you have any savings in a savings account or in cash, you can use that. You can also take money from any stock market investments you may have. Then, you can use that cash to get you through until you start making more money. You don't have to worry about getting approved for funding, so you can use the money right away.

However, avoid using all of your savings. You never know what might happen to your business, and you want to be safe. Keep at least a few months' worth of living expenses in a savings account. But you can use the rest to start and grow your business.

Get Help From Family

If you don't have enough money in savings, you can ask family and friends for help. See if one or more people you know have some money they can put toward your small business. Now, you may have to give up a bit of ownership in exchange for the cash. You don't want to just take money from your family and friends with no promise of a return. But asking people you know can be a good option.

Then, you can get the money you need, and you don't have to use your savings to fund your business. But make sure you and your loved ones agree on whether they own part of the company or if you will pay the money back so that you don't ruin your relationships for the sake of your company.

Crowdfunding

Another option is crowdfunding from strangers. You can use a website like Kickstarter to raise money for your business without asking friends and family. Usually, you want to provide a small reward to anyone who donates. That could be in the form of a thank you note for smaller donations or a free product or service for larger contributions. Crowdfunding is great because you don't need any one person to donate a ton of money.

You can promote your campaign online, and you can encourage people who like your business to help out. Then, you can use that money to grow your business even more.

Pre-Sell Upcoming Offers

If you want to offer a new product in the next few months, you may need a lot of money to make it. In that case, you can sell pre-orders of the new product and use the money to fund a purchase order. So if you need to stock your store with the next season of clothes, you can pre-sell those new styles before you get the order in. Once the order arrives, you can ship the clothes out to customers who purchased ahead of time.

A lot of authors will pre-sell books, but you don't have to be a writer for this to work. As long as you know customers will want your new product, you can get the money now from a pre-sale.

 

A business loan can be a great option for some business owners, but it's not for everyone. If you don't want to go into debt, consider a few alternative ways to get the money you need to grow your company.



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