Getting a small business loan is not easy, but if you own your own small business, you need to check into this sooner not later. I'm sure that you enjoy what you do, because if you didn't, you wouldn't have started this business to begin with. That's one of the great things about owning your own business. A lot of people get a feeling of dread when they wake up on Mondays when they realize that it is time to get ready for work. If you own your own business, it's likely that you work on nights and weekends without even thinking about it. It's not only your source of income, it's your life.
Having said that, it's important to run your company like a business. Even if just because of the convenience of it, a lot of people who run their own business could have difficulties ensuring that business and personal stay separate. If you're like most business owners, at some point or another, you're going to need to get a small business loan. This is when it's especially important that you've been keeping your books properly, and there is a very clear line between personal and business. You should avoid taking a business loan for personal reasons or personal expenses.
If you do get a business loan, or a small business loan alternative, you're going to have to track and book the transaction properly, and make timely payments. It's also important to remember that money costs money. If you are going to borrow money, it should be for a purpose that you can generate income off of, to offset the cost of the funding. Why pay 10% to borrow money if it's just going to sit in an account earning 0.05%?
If you end up borrowing money that you can't repay in a timely manner, you'll end up in a lot of trouble especially since most business funding sources require that you personally guarantee the repayment of the loan. This is where, you might think, it's convenient to have the personal liability offered by many of the legal entities available to choose from today. That, however, is not the case. Personal guarantees on small business loans supersede any limited liability that you get from your status as an LLC. The bank will do whatever it has to to be able to minimize its losses on your loan. Even if it means pursuing your home or your car. They may even liquidate your company assets if it can get them paid off.
There are certainly a lot of advantages to borrowing money for your business. You do, however, have to be cautious about over-extending yourself. Just because a bank approves you for a loan, that doesn't mean that you don't have to contemplate your ability to repay it. You'll also want to weigh in some of the unlikely things that could happen that could negatively affect your ability to repay. It's probably also a wise decision, especially after borrowing money, to look through your P&L statement and finding some line items that you can limit or do without.
Having said that, it's important to run your company like a business. Even if just because of the convenience of it, a lot of people who run their own business could have difficulties ensuring that business and personal stay separate. If you're like most business owners, at some point or another, you're going to need to get a small business loan. This is when it's especially important that you've been keeping your books properly, and there is a very clear line between personal and business. You should avoid taking a business loan for personal reasons or personal expenses.
If you do get a business loan, or a small business loan alternative, you're going to have to track and book the transaction properly, and make timely payments. It's also important to remember that money costs money. If you are going to borrow money, it should be for a purpose that you can generate income off of, to offset the cost of the funding. Why pay 10% to borrow money if it's just going to sit in an account earning 0.05%?
If you end up borrowing money that you can't repay in a timely manner, you'll end up in a lot of trouble especially since most business funding sources require that you personally guarantee the repayment of the loan. This is where, you might think, it's convenient to have the personal liability offered by many of the legal entities available to choose from today. That, however, is not the case. Personal guarantees on small business loans supersede any limited liability that you get from your status as an LLC. The bank will do whatever it has to to be able to minimize its losses on your loan. Even if it means pursuing your home or your car. They may even liquidate your company assets if it can get them paid off.
There are certainly a lot of advantages to borrowing money for your business. You do, however, have to be cautious about over-extending yourself. Just because a bank approves you for a loan, that doesn't mean that you don't have to contemplate your ability to repay it. You'll also want to weigh in some of the unlikely things that could happen that could negatively affect your ability to repay. It's probably also a wise decision, especially after borrowing money, to look through your P&L statement and finding some line items that you can limit or do without.
About the Author:
If you need to get a small business loan, there are a lot of things to take into consideration. One example is, your capacity to pay the loan back. Remarkably, that's one thing that helped get us into the mess our economy happens to be in.
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