Top 3 Reasons Small Business Loans Are Better Than Borrowing From Family
Do you have a wonderful business idea, but lack sufficient funds to turn your dream into reality? Have you've been running your own business for a while, but need more capital in order to expand? While it can be tempting to turn to family or friends for the money you need, here are some reasons you should consider a small business loan instead:
Small business loans don't require perpetual favors:
Although it may sound obvious, not everyone considers the potential total cost of a loan taken out from family or friends. When you take out a loan with a bank, your relationship ends once the whole loan has been paid off. In contrast, if you get a loan from family or friends, they may consider that you still owe them even after you have repaid them. For example, if you are a mechanic and open your own shop with the loan money, your family may consider themselves entitled to free repairs if they loaned you the money to open. Eventually, these repairs could end up costing you many times the original loan amount. While you may be fine with offering free repairs every now and then, you probably don't want to feel obligated to provide them.
The bank won't comment on how you run your business:
As long as you pay back your small business loans on time, most banks aren't going to care how you conduct your business. All they care about is whether or not their investment, in the form of your loan, was worthwhile. But if you get a loan from family or friends, you may be subjected to a near-constant stream of criticism or suggestions on how to run your business. Even if your business is doing well, they may comment on how your fliers should be bigger or say that you should use a different color of shelving in your store. By getting a loan from a bank, you'll be able to eliminate at least some of these comments.
You won't be forced to hire certain people:
Chances are good that the person you are considering borrowing money from has at least one friend who is unemployed. If you accept the loan, they may pressure you into hiring their friend. Once you've hired them, you may then find out exactly why they haven't been able to keep a job for more than a short time. With small business loans, the bank isn't going to ask you to hire certain people because you still "owe them" for the loan. The bank is only interested in your money and whether you can pay back the loan on time.