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Small Business Loans - Business Expansion

Small Business Loans - Business Expansion

It may be wishful thinking to envision business dreams and ideas

without any type of financing. While it certainly can be done,

most business owners find a time where business expansion is

needed, whether it be to purchase equipment such as printers,

computers, and photo copiers; to invest in products and services

needed to promote the business, including printed pieces,

promotional items, public relations, and advertising; or to

purchase something as straight-forward as inventory for a retail

business.

When getting a business loan, there are two clear options: a

bank loan or a credit card loan. While bank loans, in most

instances, tend to offer better interest rates, credit cards can

be beneficial if the balance can be paid in full in a short

period of time. Depending on the situation, both options are

good to consider.

Loans

A loan or other type of financing can bring growth and added

income to an existing business, or can be a valuable tool for a

start-up business, but also has the potential of becoming a

burden. Financing options need to be weighed carefully, so

before picking up the pen and signing on the dotted line,

consider the following:

- Is the interest rate reasonable? If not, consider a different

option such as refinancing your home for a cash-out payment.

Home loan rates are often much lower than business loans, and in

most instances, the interest is tax deductible, offering even

more benefit at the year's end. For this reason, check into both

options before deciding which is best for the business.

- What is the monthly payment, and how many payments are needed

to pay off the loan? If the term is longer than what you wanted,

or if the monthly payment sounds unreasonably high for your

business budget, ask for other options. Don't ever take a loan

that has high payments that will be difficult to take out of the

monthly budget. If payments are late or can't be made for even

one month, late fees will incur, credit scores will be affected,

and future loans may become difficult, or worse yet, impossible.

Loans are meant to be of assistance, not of nuisance. Don't

purposely bring stress into a business by financing more than is

affordable, even if it potentially means growth. Risk of this

nature is not always good. Borrow money slowly. Pay off one

loan, then if another is needed, move forward with another one.

Credit Cards

While not recommended for all business financing needs, credit

cards have their advantages in certain situations. Considering

the positives and negatives of credit cards is important for

business success, and using credit cards wisely is crucial.

Advantages of using a credit card as a loan source are as

follows:

- The interest can be lower. A lower rate on a credit card than

on a loan? It's definitely possible. There are many financial

institutions that will work hard for new customers. If your

credit scores are good, you may be eligible for this type of

credit card, and can consider something such as a zero percent

interest card. This zero percent interest rate is normally

available for up to six months, depending on the offer given by

the financial institution. If paying the borrowed money in full

during that particular period of time is planned, a credit card

of this nature may be the way to go.

- The money is available immediately. Bank loans can take time

to approve. Depending on the financial institution, a wait of

five to ten business days for the loan check to be cut is not

uncommon. Additionally, a waiting period is required in some

states once the loan is signed. If a credit card is already

available, and money is needed rather quickly for something such

as equipment repair or an emergency purchase, a credit card is

ideal. It's important to remember, though, that the credit card

should be paid in full as quickly as possible, not only to avoid

high interest rates and payments, but also to keep credit scores

as high as possible. Paying off a credit card quickly actually

increases credit scores, which offers empowerment for future

loans.

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Investors

A third option for a business loan is to find an investor. This

is a wonderful way to bring money into a business for long-term

expansion and growth, or to develop a new product or service.

The downside, especially to sole proprietors who enjoy fully

managing the business, is that the investor becomes a part owner

of the business. However, investors can bring much needed income

to a business, without bringing in loan or credit card payments

and interest. Believe it or not, there are many people that are

looking to invest in a business. Investors can be sought out

quite easily.

- Talk to friends and family. Not everyone finds it possible to

work with family members, though if you're one of the lucky

ones, a friend or family member could be a wonderful investor.

The trust factor is usually high with those business owners who

feel a family member could have a positive financial impact on

the business.

- Network with others. Ask friends, family, and other business

owners, as well as people you see about every day - at the gym,

the grocery store, the post office. When the word is out that

you're in search of a business investor, it can be surprising

how quickly something like this can work out.

Choosing a Loan Source

In order for a business to succeed, it's extremely important to

choose the correct option for financing - a loan, use of a

credit card, or an investor. Write the facts down to properly

envision the business' needs, as well as goals for the business.

Talk to others. Research each idea individually. Do your

homework. Think things over carefully. Review business budgets.

Take the time needed to make a wise financial decision. By doing

so, the business will be affected in a positive way.

About the author:

Rebecca Game is the founder of Digital Women ®, an online

community for women in business. A 30 year entrepreneur and

dedicated to helping other women. Visit her site: Loans for

Women

http://loans.digital-women.com