There Are Advantages to Taking on Debt for Business Growth
Smart growth is important for every business, right? Growth helps fend off the challenges of competition, reduces the risks of market or technology changes, helps attract new customers, creates valuable economies of scale, provides the ability to amortize costs over a larger scale, and generally increases the market influence of a business. At the same time, growth takes funds, and taking on business debt is the way that most businesses achieve growth.
What are the Uses of Business Debt?
Business debt can be used to expand operations, invest in facility or equipment upgrades, purchase inventory, hire more employees, acquire real estate, seize new opportunities, and address cash flow issues.
What Are the Advantages of Business Debt?
Two contrasting methods of securing funds to grow are business debt and giving an investor a share of the business in exchange for funding. The advantages of business debt versus equity funding include:
• Not giving up any ownership or control of the business.
• Securing the opportunity to take tax deductions on the principal and interest payments.
• Taking on debt and making timely regular payments helps build stronger business credit. Which can lead to more and better funding opportunities.
• Good debt financing can save a business significant money compared to expensive short-term options like credit cards, short-term cash advances, or lines of credit.
Good sources of business debt include traditional term loans from banks or credit unions, SBA loans that are backed by the Small Business Administration, and online term loans provided by alternative lenders and financing specialists.
The Drawbacks of Business Debt Financing
The drawbacks of business debt include having to pay a lender even if the business goes under, or the business’s capacity to repay a loan is impaired. Taking out a loan can affect your credit score, and it will be impacted severely if you experience payment problems. And you’ll need collateral for a loan.
Seek Experienced Financial Assistance
Contact TCF Capital for a wide range of financing solutions, tailored to your needs to help your investment dreams come to life.