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How to Know if a Small Business Loan Is What You Were Looking for

Entrepreneurship is all about managing risk and investment – and more often than not, small business owners are faced with the most familiar dilemma of all.

You need to invest cash into new equipment and facilities, hiring new staff or increasing production in order to allow your business – and your revenue – to grow. Taking out the funds from your pocket might compromise the viability of your company, but if you do not do so, then you will never be able to increase your revenue and make more investments in the future of your business. The answer is usually to look for outside funding – like a small business loan.

Most Small Businesses Fail due to Lack of Funding

Small businesses are the backbone of the American economy, much more than we may realize. 62% of all US companies employ less than five employees and the number of small businesses has grown by almost 50% since 1982 – a trend that is continuing upwards. They also make up a stunning percentage of jobs at home, as more than a third of employees it the US work for a business that counts fewer than 100 members of staff. Yet things are not always rosy: more than 30% of small businesses fail in the first two years and roughly 50% make it to five years. The reason? Usually, lack of finding – 82% of small businesses state lack of cash flow as their primary reason for failing.

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Source: Pexels

Small Business Loans Might Be Essential for Growth

Small business loans might be the answer for many of those businesses. While it is understandable that most small business owners are not very happy about accumulating debt, being hesitant to seek out the funding that is essential to keep your company above water might cost you much more in the long run. It is important to understand the basics of lending and seek out resources for small business loans made easy. You could seek out a small business loan from a bank or the Small Business Administration – there are sources that are very reliable but usually provide strict terms on how and when you will get your funding. However, since time is money, you also need to consider the possibility of alternative lenders. These usually provide more transparency and control over the funds that you get, and of course a faster decision on your credit.

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Source: Pexels

Start from Scratch

If you are unsure about which road is right for you, you can start familiarizing yourself with the process and the terms by visiting the Small Business Administration (SBA) website. Because the loans are guaranteed by the SBA, lenders take advantage of the lower risk and are happy to unlock large sums of funds. But there are also other factors to consider, like the rates and fees involved, the monthly payments, and the collateral that is very often needed for some loans. Getting an SBA loan is an extremely competitive process, so once you get acquainted with the basics, you will be in the position to evaluate whether a bank would be a better option for you or an alternative lender that provides easier and hassle-free access to funds.

Getting a small business loan might be an arduous task, but in the process, you will not only secure funding – you will also understand a lot about your company, its viability and its standing with lenders. This knowledge is key for future growth.