Benefits of a Small Business Loan (Part 2)

Small Business Loan

Benefits of a Small Business Loan (Part 2)

Whether you’re just getting started or have been in business for a while, business loans can give you the money to buy the things you’ll need. Even if you already have cash available for necessary purchases, business loans can still be advantageous:

• You can save cash on hand for other things, including emergencies

Taking out small business loans to fund costs allows you to reserve existing cash for emergencies. You never know when you might need it, and it’s a good idea to make sure you have some extra financial cushioning in place, just in case.

• You’ll establish a credit history

By taking out business loans to fund costs, you’ll be establishing a credit history; this will make lenders more likely to lend to you again in the future as needed.

Small Business Administration (SBA) loans

Small Business Administration loans are guaranteed by the SBA. With these, the SBA guarantees loans for up to 75% of their full value; should you default on your loan, the SBA will guarantee that up to 75% of the loan amount will be repaid to the lender.

Two different kinds of business loans available

You’ll generally have access to two different kinds of business loans: credit lines and standard small-business loans. The SBA guarantees both types:

• Credit line

With a credit line, you have cash on hand just when you need it; for example, you can use it to cover shortfalls during emergencies or for extra seasonal expenses. You draw against your line of credit only as needed; you only make payments on any outstanding balance. If you don’t need and aren’t using the line of credit, there are no payments to make on it as you have no outstanding balance. The cash is simply available for you to use should you need to.

• Small business loans

These are more traditional loans, whereby you borrow a lump sum of cash and make regular payments on that loan (usually monthly) until the loan is paid off. This type of loan, too, is guaranteed by the SBA.

Read part one in the series by clicking here

For more information, go to Small Business Loan at

Benefits of a Small Business Loan (Part 2) was last modified: February 14th, 2012 by Amit Kraidman
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