Bank Loans Disadvantages

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Bank loans are loans from the bank which is based on the future value of the business. Banks are very particular when it comes to granting loans because they want to be sure that the borrower will be able to repay. In some situations, if the loan is not repaid to bank can take possession of the borrower’s personal assets. Even though the bank pays for the business, they do not take possession of the establishment. Figuratively, when Joe Smith pays off the loan, he doe not have any more ties with the bank, unless he asks for a subsequent loan. A precaution that must be taken when requesting a loan is the cost of bank loans. Interest rates are very high and must be paid regardless of if the specific business became successful. This is a huge risk that new business owners, who decide to take out a loans, have to take. Borrowers receive tax deductibles which makes it easy for businesses to make monthly loans payments and keep up with interest rates.
US Small Business Administration (SBA) loan is the most common loan
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About forty-four percent took this route in 2007. A business credit card is vey quick and easy for short term needs and can build purchasing power. It is easier to get qualified, builds credit and comes with rewards and incentives. New businesses who do not have a long credit of history favor the credit card route because it is easier to receive than a bank loan. In today’s world, checking and using credit cards online are easy. Many major card offer rewards to businesses. The down fall of using credit cards is that it is more expensive. There is a monthly balance that owners have to pay off. If an owner lacked responsibility than they could face incurring late fees and penalties. Security issues are also an issue when using credit cards if they are not managed carefully. In addition, fluctuating interest rates are possible because banks can raise interest
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