So many questions but so little answers, plus who has the time to remember all the information provided?
When I first started PosterGirl Marketing, PR & Media, I knew about getting a business loan or should I say, borrowing money I don't have, and not sure if I can or want to give it back!
So, what’s a business loan?
A business loan, by upper echelon definition, is money advanced (by a third party) on the basis of the borrower’s credit-history and ability to repay the loan from personal income.
In addition to paying back the loan, you also have to pay interest. Interest is the dangling carrot (or incentive) and security for a third party to part ways with their money for a time. Also, there are fines and penalties if you don’t pay back the money according to the agreed terms. These factors need to be considered, even if a loan offers “interest free payments” up to X number of months/years.
Traditional loans are, basically, you borrowing money from somebody or an entity (usually a bank), to make a large purchase. These loans are often used to purchase/finance a business, franchise, or employ people. Also used to buy a home (aka mortgage) or a car, to renovate your home, to pay for a vacation or finance a wedding, and to deal with an unexpected event, such as: a funeral, a car accident, or a plumbing crisis.
Should I use installment payments vs. traditional loans?
Responsible “business loan” option for those bigger ticket items
When you use installment payments, you are not borrowing money from anyone else, like you do with a loan. You are using your own money, which means instead of being indebted to a bank, for example, you are indebted to yourself; which is the responsible way to spend.
Installment payments offer you the option to use your existing credit card to get an advance on things, like, office furniture, business flights, accommodations while traveling for business, a 401(k) for your employees, upgrading your company health insurance or technology (e.g. all-in-one printer, coffee machine, computers, and etc..) or to deal with matters like expense emergencies. In other words, things that will enhance your business quality of life, help you create memorable company experiences, reduce the amount of stuff you end up throwing away, and help take care of the unexpected, but necessary allocated costs.
Big Business Lending -vs- Small Business Lending: The Good, The Bad, and The Ugly?
If your small business is established (been around for four or five years), has a positive cash flow and a good credit rating, you’ll find bankers hungry for your loan business. It also looks pretty good for small business owners looking to purchase a franchise—provided the franchise is listed on the SBA’s approved list and you have personal assets you can use as collateral. Along with the good news, one of the biggest challenges I see is how the SBA, and consequentially, everyone else in lending categorizes small business.
I don’t think I can really say anything is ugly about acquiring a business loan—in fact most of it is good news. It will be interesting to see what happens during the second half of 2019. My hope is that the banks that claim they are motivated to provide small business loans are willing to lend to my business so I can continue to benefit other companies who have survived and are still thriving, but maybe not unscathed as they’ve spent the last four or five years robbing Peter to make sure Paul gets taken care of.
Don’t spend. Invest.
Invest in a new business that will improve you and your employees quality of life, replace that defective office technology to increase the value of your company, and finally buy that lounge couch you want to create the perfect relax-during-a-long-day-at-work, then get comfortable-on-the-office couch-and-binge-Netflix during office crew night to cap a grueling non-stop work week.
Spending your hard-earned money on the more expensive and better quality option, instead of opting for the cheaper, probably-will-break-after-several-months version, is a great way to focus your spending on things that actually matter and that you will value. Who knows…spring cleaning just might become a thing of the past!
Yes, loans are still an important financial tool; just not for every purchase. Don’t empower the banks that put you in debt. Use your own money without fees or penalties.
Today’s world requires more up-to-date financial options that allow us to function well, and not go into debt, but instead help us to remain in control over our own business finances.