A List of Advantages and Disadvantages when Applying for a Business Loan from a Bank

Whatever type of business you have, you need the right amount of finance to keep it running – and perhaps even make a bigger investment in the future. But if you are finding yourself having difficulty keeping up with your expenses, it may be time to consider an alternative: acquiring a loan for your small business.

Admittedly, a majority of small business owners today think of banks when it comes to acquiring a loan. But requesting a loan from a bank – and getting approved – is, more often than not, a rare occurrence, especially if your business is just in its beginning stages. Fulfilling the prerequisites for a bank loan is a cumbersome process, if not altogether impossible for most start-up enterprises. But if you are contemplating a bank loan, it is always a good idea to learn more about what you can expect, particularly when it comes to the advantages and disadvantages.

A look at the advantages of a bank loan

If you are thinking of acquiring a loan from a bank, you will find that there are certain advantages to this. One of the advantages is that it is an accessible and convenient service. Banks are everywhere, so you do not have to look far when it comes to choosing a prospective bank. And since banks can be found most anywhere, it becomes a convenient option.

Another advantage of applying for a bank loan is a choice in various types of loans. If you are applying for a bank loan, it can come in different forms and schemes that are supposed to be suitable for whatever type of need you have. Aside from this, a bank loan does not give the bank any right to become part-owner or become involved in the control of your business, unlike if you were to turn to an angel investor or venture capitalist, who will often provide a loan in return for a share or part-ownership. A bank loan will also entitle you to various tax benefits, since a percentage of your profits that is used for repaying the bank loan can be tax exempted.

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A look at the disadvantages of a bank loan

Now before you get carried away and run off to the nearest bank, you need to know the disadvantages of applying for a bank loan as well. This knowledge will ultimately help you make the right decision when it comes to applying for a loan.

One of the main disadvantages of applying for a bank loan is the fact that it is a lengthy, tedious, and time-consuming process. Banks will not just approve your loan in a few days – they need time to look over your application and the documents you have presented as well as verify your credibility and financial ability. So if you need cash for your business immediately, applying for a bank loan may not be your best option.

Another disadvantage of bank loans is the bank’s preference for established businesses. Businesses which are just starting out are already at a disadvantage, because they may not be able to present all the documents the bank requires.

But perhaps the biggest – and most annoying – disadvantage of a bank loan is the fact that the amount you want or have requested will not often be given to you. In fact, banks are known for funding just a certain percentage (around seventy or eighty percent) of the total amount you request. So in essence, even if you have been approved for a bank loan, you still have to worry about the remaining balance of funds that you need.

Fortunately, small business loans can also be acquired from alternative lending institutions such as Ashley Business Finance (you can learn more at www.ashleyfinance.co.uk), which offers loans expressly designed for small business owners and their needs.