One of the challenges of running a small business is making sure that there is enough money to meet its obligations. On any given day, employees may need to be paid, vendors may need to be paid and tax deposits may also be due. Therefore, it is important to have the capital it takes to stay liquid and give your company an opportunity to thrive. With that in mind, should you seek a cash flow loan to provide that liquidity?
Can You Get the Money That You Need?
While a business loan can provide you with capital for use today, it will need to be repaid in the future. Therefore, you don’t want to borrow more than you can afford to repay in a timely manner. However, you also don’t want to borrow less than what your company needs to stay open or take on an opportunity to grow and increase revenues.
If you can’t get the money that you need or get the money that you need with terms that make sense, it may be better to get funding from another source. Depending on the lender that you work with, it may be possible to get a quote that gives you an idea of what you can expect to borrow before you apply.
Will You Need Collateral to Get the Loan?
In some cases, it may be necessary to put up collateral to secure a loan. You may need collateral to either get the loan at all or get the money at terms that you find reasonable or easier to repay. For instance, if you could get a loan at 10 percent interest without collateral, it may be possible to get a loan at 6 or 7 percent with collateral.
While these numbers are hypothetical, reducing the risk to the lender tends to reduce your interest rate and the cost of the loan. However, if you do put up collateral, you could lose it if the loan is not repaid. Therefore, make sure you can pay back the loan or don’t take it at all if you couldn’t risk losing key corporate property or even personal property for not making a payment.
How Does This Impact Your Ability to Repay Existing Loans?
If you have current loans on your books, you will be responsible for paying those off while trying to pay new balances. Unless you know that taking a new loan will help you grow revenues or increase your margin per transaction, it may be best to wait until your other loans have been repaid.
You should also be aware that your lender will want to review your financial information and will find out about other existing loan balances before approving the loan. Therefore, the lender may reduce the amount it will lend you or even ask that it gets a preferred status to increase the odds that it gets repaid. This means paying a higher interest rate, putting up collateral or even having to convince current lenders to take on a junior status if you default on the loan.
Small businesses are the lifeblood of the economy, and the majority of Americans are employed by these companies. Working with a lender like Certified Business Loans can help you get the amount that you need at flexible terms. This can help you borrow the money you need without putting you at risk for taking on more than you can handle.