Applying for a loan is only one possible way of financing your business. Other options include equity investments, where an investor becomes part-owner of your business, and government grants. Deciding which form of financing works best for you and your business can be tricky, and depends largely on your specific requirements and financial situation. Before making any financing decisions, it is best to discuss your different options with a tax adviser or accountant who specialises in small businesses.
If you are a business that has ongoing needs and a cash flow that allows for realistic repayment without jeopardising your personal assets, applying for a loan can present great advantages compared to other financing options. Some of these advantages include:
- the lender has no say or direct entitlement to profits in your business
- your only obligation to the lender is to repay the loan on time
- the interest payments are a deductible business expense
- you can reduce the lender interest in the business by making additional repayments