Want To Grow Your Business? Loans Versus Investments
If you’re looking to grow your business, you have a few different options that you can consider. Getting financing is going to be critical to your ability to spread your wings and gain more of the business share, but doing so is not always as straightforward as it may seem. What is the best way to secure financing? There is some debate about whether it’s best to take out a loan or whether you would be better off giving investment shares away. Let’s look at the pros and cons so that you know what you should consider.
Taking On Loans
Taking on a loan, be it a cash advance or other form offers some clear advantages and disadvantages. First, the biggest advantage is that you will maintain full control over your business. For many business start-ups, this is highly important and their owners can’t dream of giving up equity in their company at such an early stage. Another benefit to the bank loan is that the interest of the payments can be used to help offset the taxes you pay, so can keep tax costs lower in that regard.
On the disadvantage side however, the first big one is that you have to pay back a steady amount on a very consistent basis and in the very beginning, it can be hard to predict what your revenues may look like. This can then go on to be quite a stressful situation for many new businesses. In addition to this, another big drawback is that many new business owners will need to use personal property as collateral to get the loan, so should your business not do as well as anticipated, you may be at personal risk. This can prove to be quite worrisome and prevent people from going down this route.
The next option is to go for equity, which like the loan situation, comes with both pros and cons. The first advantage here is that even though you are giving other people control over your business, if you choose your partners wisely, this can actually be a benefit to you. If they have experience in the business environment, they may be able to offer valuable advice that will actually help your company grow faster than it otherwise would. In addition to this, another advantage is that when taking out equity, you’ll find them to be much more creative and flexible, which many businesses do prefer. Then the biggest advantage to know about using equity is that should your business go broke, you will basically owe nothing, so you are not personally at risk at all.
On the drawback side of things, you do lose some control, so if you are someone who likes to have the full say, this is going to change your ability to do so. Furthermore, if you put depending on the nature of the set-up, you will likely lose a share of the profits you make down the road, which could have then been re-invested to help grow your business more at a later date. Finally, since you will have co-owners, you will have to keep them informed on any happenings in the business, so this will be added responsibility for you.
So there you have the pros and cons of each situation. You need to evaluate what is best for your own personal situation and make the decision based on that. There isn’t a right or wrong, but rather what will be best for you.