Theoretically, loans are amounts borrowed from a lender, which has to be paid back within a pre-defined time along with a specified amount of interest. They can be availed from banks or individual lenders. There are several types of loans of which the most common are personal loans, educational loans, and business loans. Business loans are availed most commonly to start a business. However, they might be also opted for expansion or sustaining a business in times of need. Entrepreneurs often seek business loans uk to make their business more profitable by scaling them up. A person should carefully weigh the advantages and disadvantages before opting for a loan.
Advantages Of Availing A Business Loan From A Bank
There are numerous advantages of opting for loans from banks over individuals. Some of them are:
- Convenient And Accessible — Banks are always easily accessible. You go to banks for withdrawing and depositing money. It is easier for a customer who has been using the bank for many years to avail the loans.
- Varied Options — Banks usually have many set of loans such as term loans, standard loans, etc. which have different rules and payback schemes. You get many options to choose from.
- Lower Interest Rates — Banks usually have a low interest rate as compared to individual investor.
- Tax Relief — By availing a business loan from a bank, you are exempted from some of the taxes as the profits are spent to pay the amount back to the bank.
Advantages Of Availing A Business Loan From An Individual Lender
There are several disadvantages of banks which draw people to these lenders. Some of them are discussed below:
- Easily Available — Banks often have strict policies which reject many applicants from availing the loans. These lenders do not have such strict background checking and credit history checking policies which make availing loans from them easier.
- Simple — Availing loans from these lenders do not involve tedious documentations. However, availing one from bank involves a very long application process.
- Full Grant — Banks usually do not grant the entire amount to the borrower. The lenders on the other hand, always grant the entire amount.
What Is To Be Kept In Mind?
Since it is a financial as well as a legal matter, many factors are involved which need to be kept in mind before opting for a loan. You should go through the term sheet thoroughly before availing the loan. Do not always go for the loan with the cheapest interest rate. Check the collateral for the loan which you will have to give them upon failure of payment of the amount. Maintain a good balance between the payback time and the interest rate.
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