24 Jan Finance a business with credit, pros and cons
Financing a business, usually becomes the most common option for when you need to meet the financial obligations that a company, no matter what size, has.
In our Credit and Growth Report for SMEs 2019, we learned that only 3 out of 10 entrepreneurs surveyed have a credit for their businesses. For this reason and in order for you to promote the growth of your company, then we will give you the pros and possible cons, which may arise when making the decision to finance your SME with a loan.
PROS to finance a business with a credit
You keep the total participation on your business
Unlike financing a business through investors who could contribute the missing capital, a loan helps you keep the total share on it. Since you would not have to provide shares of your company in exchange for said capital, which leaves you a total control over future decisions.
You get immediate liquidity
By choosing to apply for a credit for your business, you have the opportunity to acquire more liquidity. Since you can receive an amount that allows you to have a greater flow of money and thus meet the obligations that are short term. For example, you could face payroll, provider, service payments, and all those accounts that arrive on a regular basis.
You open the way to exponential growth
On the other hand, if the goals you have proposed for your business are related to achieving growth, credit can help you, opening an opportunity to invest in a strategic plan and boost it to the next level. You could use it for those actions that really require a large capital, such as, a territorial expansion, implementation of technology in internal processes or even innovate.
Improve the business model
In the end, if you allocate your credit to invest in your small or medium business, you would be able to improve the model you are carrying and therefore increase your profitability. This can be beneficial, since the value that your business represents, will be striking for the industry in which you develop, managing to strengthen and consolidate your permanence in the market.
CONS you could face
The possible aspect that could play against you is the settlement of the credit, however there are recommendations that you can take into account to avoid reaching such a situation. The first thing would be that when applying for the credit, you have an evaluation about the payment capacity that you have, in order that you accept an offer that you can really pay without risking the finances of your business.
Followed by this you can create a payment plan that allows you to allocate from your income the exact amount to cover the installments on time. This can help you so that you do not generate late interest and the cost of the credit ends up rising.