Consider this: You want to open a small business in the greater New York City area. You have an awesome idea for a service or product that will be unmatched by any similar existing business in the marketplace. You have a storefront or facility in mind that would be perfect for your new business endeavor. But hey, money is tight — especially for a project of this magnitude. So what do you do? Give up? Bug your friends and family members for funding? Set up a Kickstarter or Indiegogo campaign?

At the Hedaya Capital Group, we have to admit that there are multiple ways that you can acquire the necessary funding for your next business endeavor, but we also have to let it be known that some ways are better than others. Sure, your friends and family members might be okay with the idea of loaning you some capital, but that can put some strain on your personal relationships. Additionally, crowdfunding is a great way to raise capital, but then you are partially inserted to the potential hundreds of people who made a contribution.

At the Hedaya Capital Group, we believe that the best way to acquire the capital that you need to jumpstart the business of your dreams is to apply for a commercial loan from a trusted local lender. Sure, loans have a certain risk associated with them, but there are pros and cons that should be considered before you decide to move forward in a different direction — because you might realize that a commercial loan is perfect for your unique situation.

Below, we have listed some of the most notable pros and cons of applying for a business loan so that you can make a more educated decision as to what capital-raising venture makes the most sense for you.

The Benefits of Commercial Loans

As with any loans or financial assistance, there are benefits and drawbacks to each type. One of the driving factors in determining if a commercial loan is right for you is your unique situation. Below, we have listed some of the most noteworthy benefits so that you can objectively assess if they apply to you.

  • Of all loan options, commercial loans offer the lowest interest rates. Because of this, both established and new business owners can access the funding that they need to successfully grow while maintaining overhead costs associated with the business venture.
  • Commercial loans often have longer terms than personal loans, allowing the business to pay back the working capital in smaller increments over an extended period of time. Commercial loan terms are typically, but not limited to, between three and 10 years in length.
  • Paired with longer loan terms, commercial loans are known for having lower interest rates. Combined, both factors make for a safe way to access working capital while minimizing risk.
  • Commercial loans can be much larger than personal loans, meaning that the bulk costs associated with starting a business can be encompassed by one loan application.
  • Commercial loans are more likely to be unsecured than other loan types — meaning that you would not have to put up collateral for the loan. That being said, this relies solely on your unique situation.
  • Unlike venture capital investments, commercial loans allow you to still completely own your company or business without having to forfeit a small percentage of ownership to the investor.

As you can see from the above information, there are a number of benefits associated with commercial loans that you can’t get from other capital fundraising strategies. That being said, there are some drawbacks that could negatively affect some potential loan applicants.

Drawbacks of Commercial Loans

As we said above, there are some drawbacks associated with commercial loans. For some people, the benefits of the loan simply might not outweigh the drawbacks. By speaking with a member of our team, here at the Hedaya Capital Group, you will be able to weigh the benefits and the drawbacks of each loan in order to find the one that best fits your needs. Below, we have listed some of the most common drawbacks that are associated with commercial loans.

  • Funding can be challenging to qualify for. In order to qualify for a commercial loan, it is important that you have excellent business credit. For those who are just starting a business, it is important to build strong credit before submitting an application.
  • The application process can be long and exhausting. When you apply for a commercial loan, there are many different iterations of planning and evaluation that must be conducted before the lender can comfortably approve your loan. At the Hedaya Capital Group, we do our best to expedite this process by working closely with our potential investments.
  • Commercial loans require detailed planning and bookkeeping. Smaller loans are not as detailed as commercial loans. With a commercial loan, the lender will want to see a detailed plan on how the capital will be spent.
  • If you fail to qualify for an unsecured loan, you may have to put up collateral. While commercial loans are typically unsecured, they can sometimes become offered as a secured loan if the lender feels like there is more risk associated with your business plan.  

While there are known drawbacks associated with commercial loans, it is important to remember that each drawback is circumstantial and not present in all loan agreements. So be sure to work closely with your lender during the application process to get a better idea of what drawbacks you might be exposed to.

Contact Us About A Commercial Loan Today!

If you are looking for working capital to grow your business, we urge you to get in touch with our team to discuss the various different funding options that we offer. Serving the greater New York City area, our capital group is invested in your success. So get in touch with us today to discuss funding options with a member of our team!

We look forward to hearing from you and discussing how we can help!

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