At some point, every business needs an outside source of capital to further growth. For small businesses and startups, there are a variety of ways to raise capital. One of those methods is bank loans, which, in the right circumstances, can benefit a business in the short and long-term. In this post, we will explore advantages and disadvantages of bank loans for small businesses.
Advantages of Bank Loans
Low Interest Rates: Generally, bank loans have the cheapest interest rates. The rates you pay will be cheaper than other types of high interest loans, such as venture capital. As Bizfluent says, bank loans offer significantly lower interest rates than you will find with credit cards or overdraft.
Flexibility: When you receive a bank loan, the bank will not provide a set of rules dictating how you spend the money. While venture capitalists and angel investors will restrict what you can do with the money, bank loans can provide you the flexibility to spend the money where you see fit. Whether you need capital to purchase new equipment, enter a new market, or carry out a new marketing plan, you can use the money from a bank loan.
Maintain Control: You don’t have to give up equity to get a loan from a bank. Venture capitalists and angel investors typically require you to give them equity or some say in your company. However, this is only true if you make your payments to the bank on time.
Disadvantages of a Bank Loan
Requires Profitability: While venture capitalists and angel investors usually take risks to invest in companies that haven’t yet proved profitable, banks will take no such risk. To be eligible, your company must be consistently profitable, which disqualifies the majority of startups.
Complicated: Obtaining a bank loan is extremely time consuming. You will be required to fill out excessive paperwork, and the terms of interest will be quite complicated. The process will not be quick either, often, it takes several months to qualify and obtain capital from a bank. Compared to other financing options, bank loans serve as one of the most difficult to obtain.
Collateral: Regardless of your profitability or how good your credit score happens to be, banks will need some form of collateral. Banks need to protect themselves in the case that you can’t make your payments.
What Does Revtek Capital Offer?
At RevTek Capital, we understand the complications and challenges that come with borrowing money. Whether it be a bank loan or another source, every type of loan has its drawbacks. That’s why we’ve simplified the process for small tech businesses with recurring revenue.
Our model is quite simple: we provide the capital, and you pay it back in manageable monthly payments based on your monthly, recurring revenue. To be eligible, you do not need to be profitable, but you should have a predictable recurring revenue of at least $50,000 a month. The benefits are substantial:
- We don’t take your equity.
- We don’t take any control or ownership.
- Our terms are simple and easy.
If you are looking to raise capital for your startup, choose RevTek. Our experienced team can provide you with the money you need to expand your tech startup. Contact us today to learn more about how we can help your business grow.
