Guide on the Pros & Cons of Business Loans and Investors
BUSINESS LOANS VS. INVESTORS – Here are the pros and cons to help you decided which to choose for your business, a loan or a set of investors.
In starting or growing a business, a huge amount of working capital may be needed. That is why not everyone can easily start a business venture as there are a lot of fees that an aspiring businessman should be prepare for. There are operation expenses including the salary for the manpower.
Usually, to help cover up the working capital requirements, businessmen would consider either of two things – applying for business loans or inviting investors. Both of the options got their own pros and cons.
Based on an article on Finder, here are the pros and cons of the business loans vs. investors to help you decide on which to take for your business venture:
Business Loans Vs. Investors
Business Loans
- Pros
- You get the same ownership of the whole of your business
- You may borrow money at lower rates.
- You can foresee how much in totality you will have to pay for the amount you borrowed for your business.
- You can take out a loan anytime depending on the terms and repay it.
- Cons
- You may need a collateral as most banks require it in applying for a business loan.
- Your personal credit history may affect the approval status of your loan application.
- You may be limited to certain purposes in terms of the usage of the fund your borrowed from the bank or lending company.
- If you are just starting, it may be hard to earn the approval of the lender.
Investors
- Pros
- Investors may put more fund on your company more than the maximum loanable amounts offered by banks and lending companies.
- You can get personal guidance from investors who already have experienced in the field and can give inputs for the growth of the company.
- It may be easier to gather investors most especially of the potential growth of your business than get the loan’s approval.
- Cons
- Based on the article, there is a chance that investors can take up majority of the business shares.
- On the personal level, there are possibilities that investors would suddenly pull out their shares once there are disagreements on certain business decision-makings.
- You may give out more money when your business prospers than you will be required to pay for a business loan interest.
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