Why you shouldn’t be afraid of small business loans or financing

In this 5-minute read:

  • How small business funding can pay for itself
  • How you can get better rates on business capital
  • Why even large businesses still use business lending
  • How a small business loan can improve your business’s credit rating

When economic, environmental, or medical disasters hit, small businesses are often hit hard. Millions of businesses signed up for Paycheck Protection Program (PPP) loans issued by the authority of the Small Business Administration (SBA) under the CARES Act, due to the devastating economic effects of the COVID-19 pandemic.

Previous disasters, recessions, and weather events have similarly driven local businesses to acquire emergency funding, but physical and economic disasters aren’t the only reason small businesses need a reliable and ready source of small business capital.

Womply has partnered with various trusted lenders to offer you the best possible rates on small business funding. Whether you need a term loan, a line of credit, or another type of small business capital, we can help! Click here to learn more.

Let’s go over a few reasons why you shouldn’t be afraid of taking out a small business loan, and then we’ll talk about some potential sources of funding.

Note: this article is for informational purposes only. Consult your business attorney and/or financial counselor to make sure a business loan makes sense for you.

Most businesses need funding, financing, emergency loans, or other capital during their lifecycles

If you are reluctant to take out a business loan because you think it means you’re somehow lesser than other businesses, get that thought out of your head right now. Many businesses can’t even get started without the help of a small business lender, especially if the owner doesn’t have a lot of support from family and friends for start-up costs. 

Additionally, most if not all small businesses find themselves in need of business capital multiple times throughout their life-cycles, for expansion, improvement, new equipment, repairing damage from fire or flood or vandalism, hiring, paying down higher-rate loans, and many other reasons.

Even huge, enterprise companies with lots of cash reserves are constantly borrowing funds to maintain cash flow, upgrade equipment, start new divisions, acquire other businesses, or for other financial purposes. 

So, forget any supposed stigma related to borrowing money to save or improve or grow your business. That’s what the lender is there for.

You can theoretically make money by borrowing business capital at a lower rate

Of course you should only borrow money if you can pay it back on time and in full. This is the first lesson in Business Loans 101. That said, there’s the possibility that you can actually make money by borrowing. 

Let’s say you see the potential for growing your business, offering a new service, or selling a new product that brings in significantly more profit, but you need a business loan to make it happen. You can secure business financing at a reasonable interest rate, invest that funding in your improvements in facilities or services or products, and potentially make enough profit that it covers the cost of the interest on the business loan… and then some.

If you theoretically borrowed at 7% and you earned 10% more than before, you basically got paid 3% for taking out the loan when all is said and done. And the improvements and increases in revenue don’t go away after you’ve paid the loan off.

Using small business financing can improve your business credit rating

Similarly to how your personal credit rating can be improved by maintaining a line of credit or other type of loan and paying regularly and on time, your business credit rating can be improved if you borrow funds and pay regular, on-time payments. This shows creditors and reporting agencies that you are a responsible business owner who pays your bills on time, and you can be trusted with larger loans. 

It may seem contradictory that borrowing money (and paying as agreed) seems to show lenders that you don’t actually have any real need to borrow money (and thus can be relied upon to pay it all back as agreed), but that’s how it works.

Regular small business loan customers can ask for lower interest rates and other perks

Similarly to how an improved business credit rating can improve your chances of getting a better/bigger loan, once you’ve established a trusting relationship with your lender for a business loan, you can sometimes get better rates, lower fees, or other perks that are reserved for “elite” customers.

Some lenders will offer 0% origination fees on your next loan, waive any prepayment penalties, lower your interest rates, and offer other perks that can save you a lot of money. But they usually only offer these benefits to current or former borrowers. So, you need to borrow money in order to save money (next time).

Womply can help you get the small business funding that’s right for you

Womply has partnered with various trusted lenders to offer you the best possible rates on small business funding. Whether you need a term loan, a line of credit, or another type of small business capital, we can help!

Click here to check out our small business loans resources, or schedule a free, personalized demo of Womply’s small business apps to learn more!

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