Your small business might need quick access to capital from time to time, whether it be to alleviate seasonal lulls or to expand or hire more employees. Kabbage is here to help you and your small business; here, we’ll break down exactly how a business loan can boost your success.
Benefits of small business loans
Small business loans can benefit your business in various ways. From cash flow to expansion (both on-and-offline) to hiring extra staff, taking out a line of credit can help your business grow and become successful. Here are just some of the ways a small business loan can aid your business:
- Maintain control
If you need funding, you might consider working with a co-owner of your small business. However, in doing so, you give up some control over your business as well as forfeit profits made if you ever decide to sell your business. A small business loan allows you to maintain full control of your small business and any potential profits.
- Avoid conflicts
You might be tempted to ask friends or family to help you with your business’s financial needs. However, this can be challenging. Unless you have a solid contract in place, friends or family can inject themselves into your business and try to make decisions (they loaned you money, so they have a stake in the business). With a small business loan, you can get funding without the familial tension.
- Protect your business
Sometimes, small business owners are tempted to pay out of pocket to fund their business. Mixing your personal and business finances should be avoided, as it can cause complications further down the line. The IRS requires a separate account for business and personal. By mixing the two, your financial history will be muddled, making it harder for you to file taxes. It can also hurt your credit on both sides.
- Purchase/rent new equipment
Upgrading your equipment can be an expensive task, but if old equipment hurts your small business, it’s a necessary cost. Using a Kabbage line of credit, you can purchase or rent new equipment for your small business without having to dip into your personal savings or cash flow.
- Manage inventory
If you’re running low on inventory and you have a busy season or job coming up, you can use a line of credit to help tide you over. Let’s say you sell novelty items and the holiday season is coming up, but you haven’t managed your cash flow as well as you could, leaving you in a tizzy. A line of credit can alleviate these worries by lending you the funds you need to stock up for your busy season.
- Smooth over cash flow lulls
Some businesses experience seasonal lulls, which, if not managed properly, can hurt your cash flow. With a line of credit, you can take out funds to alleviate these lulls by helping with payroll, purchasing new products to sell during these lulls or even investing in a marketing campaign to help combat the seasonal pauses.
- Hire more staff
As your small business grows, you’ll be taking on a lot more on your plate. You might not have the funds yet to expand your workforce. A small business loan can give you the funds you need to hire new staff – part-time, full-time or freelance – which will help grow your business more quickly.
- Expand your business
Perhaps you want to expand or open an online store for your business, or you’re tired of working from home and want to rent an office space. A line of credit allows you to hire a freelance graphic and web designer as well as marketing expert to aid the online expansion. You can also look into some real estate without financial worries as well.
Breakdown of a small business loan
With a Kabbage line of credit, you can qualify up to $150,000, and, unlike a traditional bank loan, you don’t start payments right when you’re qualified. The reason being, you don’t have to take the funds right away if you don’t need them. Those funds are there for whenever you’re ready.
Kabbage’s term lengths vary from six to 12 months. Each loan’s principal balance will be divided equally across your monthly payment schedule. Your monthly payment will consist of 1/6 or 1/12 of your total loan amount plus a monthly fee. Fee rates for Kabbage lines of credit range from 1.5 to 10 percent depending on your business’s performance factors. To get an illustrative estimate, check out Kabbage’s loan calculator. However, if you find that you’re able to pay your loan off early, there are no prepayment penalties so you can pay your loan off in full and avoid any subsequent monthly fees that have yet to post to your account.
Finding the best small business loan for you
The type of funding you receive should be based on your needs. You don’t want to take out a large, long-term loan if you only need a small amount of funding. You also don’t want to take out multiple small business loans for larger ticket items like purchasing property or buying large, expensive equipment. Traditional loans are usually given by banks. While these tend to have lower interest rates, they also have longer terms and provide large sums of money. For example, one might want to open a second location in a prime real estate area, and they might need $300,000 to purchase the building or store. For this, they would go to a bank to apply for a traditional loan and would be paying back this loan for years.
A small business loan is better for short-term needs and faster access to cash, like cash flow lulls or inventory purchases. Kabbage’s small business loans are unsecured, which means you don’t have to put your assets up for collateral should you be unable to make payments. Unlike a traditional loan, you don’t take the entire lump sum at once. You can take what you need when you need it, and you don’t have to start paying back until you borrow.
If you need quick access to capital for your small business, Kabbage is here to help. With our lines of credit, you can apply and qualify in 10 minutes or less. Similar to credit cards, you borrow what you want, when you want and only pay back what you borrow.