How Big is Too Big When it Comes to Business Loans?

Business Loans

Are you looking to start a new business or working to grow your business to the next level? Many small business owners often consider business loans in order to achieve their goals. While business loans are sometimes an excellent source of building revenue, they can often spiral out of control. This leaves them unmanaged and causes major issues for the business.

Related: 3 Ways to prepare your business for the “slow season”

This is especially true when borrowers get in over their heads with a business loan that is simply too big. Large business loans lead to large payments. These payments can become a huge obstacle in the way of the success of the business.

Choosing to seek business financing or loans can definitely help to start a business or to help with working capital. Some businesses will use their loans to purchase the inventory or raw materials they need to get their business going. They might also use it for essential business needs such as equipment, land or office space.

The truth is, most businesses will need some sort of financing at one point or another to ensure their business stays on track. Some businesses will seek out business loans periodically throughout the life of the business.

For small businesses, the most sought after financing is the traditional small business loan. These loans are extremely beneficial, but can also be difficult to qualify for. To secure a loan, it is sometimes necessary to look for alternatives outside of the big banks that most people are familiar with. Often, business owners will look first at what they can accomplish on their own, such as a home equity loan.

The caution for those who are seeking an additional source of capital for their business is to carefully calculate what amount they will be able to successfully pay back. Taking a home equity loan to start a small business can turn into a disaster if the loan amount it too high. Should the business fail or get a very slow start, not only will the loan be impossible to repay, but it could also cause issues with the value of the home.

Choosing to go with a traditional small business loan can also lead to trouble should the business hit a snag or a slow start. It is important for business owners to borrow as little as possible. Pay close attention to the details of the loan. Keep payments low by avoiding high interest rates and shorter terms.

You might find that you can lower the amount of a loan you need by doing some creative accounting. This can help you cut corners and find extra money where you need it the most. We invite you to set up a free consultation with Hacker Accounting. Wee can discuss the types of financing you are looking for and offer ideas on how to keep your loans small by finding other sources of money. Call us today at 602-375-5251.

Chris Hacker
Chris has been working in the bookkeeping and accounting field for over 15 years preparing business, income and payroll taxes. Chris has a bachelor’s degree from Arizona State and is an Enrolled Agent with the Internal Revenue Service.