If you’re thinking about getting a business loan, there are several different options to explore. Banks are often the first place people think of when they need funding. However, before taking out a bank loan for your business, it’s important to understand the pros and cons. Here’s what you need to know so you can make an informed decision.
Advantages of Bank Loans for Business
If you’re looking for a long-term business loan, there are some advantages to borrowing from a traditional bank. Generally, a bank will offer a low, fixed interest rate and you’ll have predictable monthly payments.
When you sign your loan agreement, you’ll know exactly what you’re getting into as far as your repayment plan goes. While many bank loans have fixed rates and terms, some may have variable rates or balloon payments. This can provide additional flexibility.
Banks often offer loans in higher amounts than alternative sources and may have longer repayment periods. In some cases, you may be able to qualify for as much as $1 million and pay your loan back over as long as 25 years. Most bank loans for businesses are also unrestricted. This means that you can use the funds for whatever you need. If you’re looking for money to cover payroll, provide employee bonuses, or expand your business, you might appreciate having this extra leeway.
Disadvantages of Using a Traditional Bank
Based on the advantages, you might think getting a business loan through a bank is a no-brainer. However, there are some potential drawbacks you’ll need to consider. The biggest concern for small business owners is the ability to qualify.
Traditional banks are risk-averse and may not be willing to approve loans for businesses that have less-than-perfect financials. Even if you have great credit, steady income, and many years of running a successful business, you might find the application and approval process to be very tedious.
Getting a business loan through a bank will require you to fill out a long application and provide a significant amount of documentation. It can also take weeks or even months to find out whether you’re approved. If you need a bank loan for business right away, this can be a major drawback.
Most bank loans also require you to put up collateral to secure your loan. This may include your property or equipment. Many small business owners are not comfortable taking this risk.
Other Options for Getting a Business Loan
If you’re not willing to wait forever for your loan approval or take the chance of losing your business if things don’t go as planned, then you may want to explore other options for getting a business loan. Some of the most popular include term loans from online lenders, equipment financing loans, and cash advance financing. Here’s a closer look at each alternative.
Term Loans
A term loan from an online lender will provide you the cash you need – without the hassle of traditional bank loan applications. When you take out a loan from Zinch, you’ll enjoy a short application process. Even better, we’ll let you know whether you’re approved within 24 hours.
Our online term loans have fixed payments and terms ranging from 3 to 12 months. This is ideal for business owners who need money quickly and want to add a set repayment amount to their monthly budget.
Equipment Financing
If you specifically need money for a new piece of equipment, then you may want to explore equipment financing. These loans use the equipment you buy as collateral, so you may be able to get the loan even if you don’t have great credit. The drawback, of course, is that the lender will repossess your equipment if you’re unable to make your loan payments.
Cash Advance Financing
Getting a business loan is more difficult for certain types of businesses. If a lot of your income comes through credit and debit card transactions, you may want to explore the possibility of cash advance financing. This flexible borrowing option allows you to repay the money as you earn.
Payments are calculated as a percentage of your sales and are automatically collected from your credit card processer or via automated clearing house (ACH). Many business owners love this option because it doesn’t require you to put up collateral or provide a personal guarantee.
Getting a Business Loan Doesn’t Have to Be a Hassle
At Zinch, we’ve been providing loans to business owners for over 15 years. Contact us today at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
