From having the security of a fallback plan to finally achieving liftoff with the business, here are 11 answers to the questions, “Can you share any lessons you learned from taking out a small business loan? Was it worth it overall?”
Yes, Provided a Safety Net
Taking out a small business loan was definitely worth it for my company.
According to Fundera.com, over 73% of small businesses get approved for a line of credit (or LOC). Having access to credit helps prepare for any unexpected costs or emergencies that could arise. Loans are available with different terms, including lower APR rates, which can be beneficial in saving money long-term.
In my experience, I got as low as a 7% interest rate, compared to my Amex, which is 18%. This can ultimately help ease financial stress and create a buffer for unexpected expenses. Overall, getting a small business loan can be beneficial when done thoughtfully and with financial responsibility in mind. Knowing there is a backup plan in place gives invaluable peace of mind that can help give you the freedom to pursue what matters most-growing your business!
Yes, Allowed Me to Keep Control
I didn’t want to get investors for my company, as I would have to give them a share of my profits and a say in how I ran my business. Instead, I opted for a business loan, where the only requirement was to pay back a fixed sum plus interest to the lender, regardless of how much profit I made.
By not having to rely on investors, I could keep control and management of my business as it grew and create a company culture that was true to my values. Getting a small business loan has allowed my company to stay nimble and agile, giving me the freedom to explore new opportunities as they arise.
Yes, but Understand the Risks Involved
In my experience, getting a small business loan was absolutely worth it. It allowed me to take my business to the next level and expand into new areas. We could purchase additional equipment, hire more staff, and spend our marketing and operational budget, which resulted in a significant increase in productivity and profits.
One lesson I learned was that you need to be organized and have a strategic plan for how you will use the loan. You should make sure you understand the repayment terms and conditions and be sure to create a budget that allows you to pay back the loan on time.
It’s also important to be aware of any potential risks associated with a loan, such as the possibility that your new investment could fail and you may not repay the loan on time. So I think taking out a loan may be a good idea for accelerating your business growth, but only if you have a rational plan for how you’ll use the money and understand all the risks involved.
No, the Stress Was Unnecessary
I believe that taking out a loan for my small business wasn’t worth it because it placed me under a lot of stress. I didn’t even know if my business idea would work, so the pressure of paying back the loan led to sleepless nights.
If you’re thinking about taking out a small business loan, consider that when you start your first business, you will naturally make a lot of mistakes. And you don’t want this loan to place unnecessary stress on you. Instead, try raising capital yourself by saving money from your job for a few months. This will give you enough capital to bootstrap your business with significantly less stress.
Maybe, Consider Both Pros and Cons
One benefit of getting a loan is that you can get the financing your company needs without having to give up equity. If you’re thinking about using investor funding instead of bank loans or another form of financing, keep in mind that it has a cost: you’ll be sacrificing some control.
Working with a lender can be your best option if you don’t want to have company partners or if you want to look for partners without having to worry about money. Getting a loan takes time. Gathering all the documents can seem intrusive. It can also take some time for the lender to analyze your application and respond.
Another disadvantage is the effect on cash flow. You’ll have to make regular payments if you borrow money from a financial institution. Although some loan arrangements provide interest-only loans for a while, most debt payments include both interest and principal. It can be difficult for startups.
Yes, Helped Us With Buying Inventory
Our company focuses on providing innovative health and wellness products and helpful information that helps people live better, healthier lives.
At the beginning of 2022, we went through a period where we were blowing through cash on marketing, running the back-end aspects of our digital business, and paying for content. As soon as orders came in, we realized our budget had gotten so depleted that we couldn’t fulfill nearly half of the orders.
So, we went to a local bank and got a small loan that was only used to purchase inventory. This was a game-changer for us because it meant that we could now take full advantage of the growth we had seen. Eventually, we paid off the loan, and we are now in a much better financial position than we were back then.
Yes, but Remember to Be Organized
Getting a small business loan was definitely worth it for our company. Not only did the money provide us with the capital needed to invest in new equipment, supplies, and professional services that we otherwise wouldn’t have been able to afford, but it also allowed us to expand our operations and increase our customer base.
Taking out a small business loan wasn’t easy, however. We had to provide detailed information about our company’s finances and operational structure in order for the loan to be approved. We also had to provide collateral in case we could not pay back the loan.
One of the biggest lessons that we learned from taking out a small business loan was that it is important to be organized and know exactly what you need in order to get approved for a loan.
Yes, Gather Your Paperwork Early
Taking out a small business loan was one of the most important decisions I ever made as a business owner; it allowed me to make some investments that would change my company’s trajectory for the better.
I didn’t realize at the time just how much effort goes into securing a loan, but what I learned was that preparation is key. Gather all your paperwork early in the process so you can present an accurate picture of your financial standing and ensure the application process moves along swiftly.
This will give you an edge in getting the best terms. It’s important to remember this lesson—it could save you precious time and money!
Yes, Improved Our Credit Rating
Small business loans are helpful for business growth and improving credit ratings. Whether you want to expand your business or offer a new product, your business needs money to run its operations.
For example, renting office space for new hires would require cash. Small business loans serve the purpose effectively. Moreover, with timely payments, your company can easily qualify for other loans. The higher your credit score, the more loan opportunities will be available to you.
Spencer Reese, CEO, Military Money Manual
No, It Forced Us to Take Worse Terms
When we were starting our health and wellness start-up, we were hemorrhaging money. We were spending so much on the back end and working quite hard to ensure that we had a team of medical experts in place to help us with content.
Therefore, we needed some money to stay afloat, so we naturally tried to apply for a small business loan. However, we did not have any significant assets to back our application, and to make things worse, our business was still not generating any cash flow.
Even though we could get several loans, the terms were not as we expected. Because of the condition of our business, it was hard to get low-interest and good repayment terms. But because we needed the money, we had to take an expensive loan. Although the money helped, considering the interest we paid, it was never worth it.
Yes, Got My Company Off the Ground
Yes, the small business loan I took out in the past is probably the most successful investment I’ve made in my entire life.
A few years ago, I worked for a company that managed several affiliate comparison websites. My experience at that company ultimately gave me the knowledge and industry experience I needed to start my own affiliate marketing company.
However, I knew then that if I wanted to start my own business; I had to do everything I could to make it happen. Of course, that meant quitting my job and finding another source of money. I approached Lloyds Bank here in the UK, and they approved me for a small business loan. The loan was just enough to hire a few people and get my business off the ground.
Long story short, the business became a success, and I paid the small business loan back in full last year. All in all, the small loan I took out was ultimately the catalyst for me to become a successful full-time entrepreneur.
Brett Farmiloe is the founder of Terkel, a Q&A platform that connects brands with expert insights.