If you’ve ever watched an episode of Shark Tank then you know that business owners often have to choose between receiving a loan or selling a portion of the equity of their business. The decision isn’t an easy choice to make. If you are considering getting a loan or selling equity, here is information that can help you decide between taking a loan or selling equity in your small business.
Loan
Pros
Taking a loan has many advantages. The most important advantage being business credit. Just like you, your business has a credit score. By taking a loan and successfully paying it back you’re able to improve your business credit score. Having a high business credit score can help you access capital in the future. It’s important to pay back your loan in a timely matter and never miss a payment so that your business can experience the benefit of having great credit.
Cons
There aren’t many disadvantages to business loans, but one challenge many business owners face is where to go for a business loan. There are many different types of loans available and finding the one that’s right for your business needs can be a challenge. Financing your Way understands that there are several loan providers that offer business loans and choosing the right one is critical to your overall success. We help business owners by comparing rates and offers and presenting the best choices for you.
Equity
Pros
Selling equity in your business has advantages, especially if the investor has expertise in your industry. Once an investor purchases equity they become a stakeholder in the overall success and will provide guidance and resources to help see your business succeed.
Cons
Selling too much equity in your business can lead to you losing controlling interest and the overall direction of your business. It’s important to only sell equity to the point that you still have majority interest. It’s best to maintain no less than 51% ownership of your business to retain controlling interest.
For more information about business loans visit our blog at www.financingyourway.com/blog.