Many small businesses will experience hardship at some point during their existence. Indeed, 73% of small businesses use loans –– and that figure should galvanize any new business owner and help alleviate any fears they may harbor about business financing. Just because a business owner is a little short on cash from time to time, it doesn’t mean they need to panic. Unfortunately, some business owners do panic and decide using personal savings to fund their company is the best way forward as opposed to a small business loan. And using personal savings in your business just isn’t a good idea. In this post we’ll discuss the advantages –– and many drawbacks of dipping into your personal savings to cover business expenses:
Why Business Owners Consider Using Personal Savings
When business owners find themselves in a pinch, they can sometimes make unwise decisions. There are several reasons why a business owner might elect to use their personal savings instead of applying for a business loan, including:
- Fear of not being able to pay back the interest on a loan.
- They won’t receive funding in time to deal with their problem.
- They won’t be accepted to begin with, due to spotty financial histories or less-than-stellar credit.
Given this line of reasoning, it’s understandable why certain small business owners would find using personal savings preferable to applying for a loan. The truth is, though, none of those concerns are legitimate, thanks to the emerging field of alternative business lending.
Advantages of a Small Business Loan
Rather than using personal savings in business, entrepreneurs should exercise all options before that. The good news is, there are plenty of business loans available to companies across all industries. Not only are these loans company-specific, but alternative lenders have made it even easier and more advantageous for small business owners to pursue loans than ever before. That’s because lenders will work with companies to find a payment plan that works for them, rather than using a cookie-cutter rate like the bank. Furthermore, lenders don’t require stringent credit checks and collateral like banks do.
And lastly, there are a plethora of loan options that can help a business acquire funding quickly. You don’t have to wait weeks or months to get crucial financing. You can apply today and secure the cash you need within 24 hours.
The Bottom Line
Using personal savings in your business will almost always cause more harm than good. Not only will you stretch yourself too thin, but you could end up facing bankruptcy or even worse consequences as a result. For the sake of your personal and business credit, don’t ever squander your savings when there are loan options available. To get started finding the perfect financing alternative for your business, contact the National Business Capital team today.