When a business owner is looking for capital to start and run the business, they will not be short of choices. One of the ways to raise cash and ensure that the operations in your company do not stall is obtaining a loan. In the past, businesses only relied on traditional loans as the only to obtain cash. However, numerous shortcomings have been associated with conventional loans, and more companies in modern days prefer stock-based loans and margin loans. The tighter lending criteria from the traditional lenders are also one of the common reasons why there is a shift towards stock-based loans. The traditional banks have not only increased their interest rates for the loans, but they have also tightened the qualifications for qualifying. In this post, we will determine some of the benefits that a business owner can enjoy when they choose to utilize stock-based loans to finance the business. Read on for more details.
If you choose to seek a stock-based loan, you will be using the stock as collateral. One of the best reasons to consider this loan is the fact that they provide a higher loan-to-value ratio, and this will mean that the business owner will have a chance to raise more capital from the same value assets. In most cases, the loans will also come with fixed interest rates, and this means that one can enjoy certainty throughout the loan.
In most cases, when one is looking for a loan from a traditional lender, they will need to pre-qualify to obtain the loan. Most banks usually check the credit score of a given business before deciding on whether you qualify for the loan or not. Apart from checking the credit score, the lenders will only offer loans for a specific purpose. On the other hand, when you prefer to find a stock-based loan to finance your business, there is no need for pre-qualification. The lenders providing stock-based loans also do not require one to outline the reason why they need the money, and this gives you the ultimate freedom to invest the cash in whatever way you need without explaining to the lender.
It is also advisable to consider seeking stock-based loans considering that they are processed faster when compared to the traditional loans. The stock-based loans will be funded quickly, usually less than seven days, and this provides you the cash you need to run the business.
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