Pros and Cons of Taking Out a Small Business Loan

Charu Mehrotra
2 min readSep 24, 2022

Whether you’re seeking startup money or additional funds to grow your existing business, know what you’re in for before applying for a business loan.

A small business loan can be a great boon to you, whether you’re just starting out or looking to grow. However, it’s wise to know just what you’re getting into when you ask a lender for a large sum of money. Compare the pros and cons of taking out a loan for your small business and make the decision that best fits your needs at this juncture.

The Pros

Let’s start with the upsides of a small business loan

  • You can grow your business more quickly with a loan, whether by opening a new location or expanding the variety of products you offer. That lump sum can help you make more giant steps in a shorter period of time.
  • With a small business loan, you won’t have to tangle with investors on your board of trustees. You’ll retain full control of the company and have the final say in what you do with your loan.
  • Cash flow problems can cause hiccups in any small business, but with a loan, you can overcome those challenges more quickly. Set your sights higher without worrying about small crises every step of the way.

The Cons

Before you take the leap into applying for a loan, consider these possible drawbacks:

  • Many small business loans carry relatively high-interest rates, especially if your credit score isn’t what it could be.
  • Loan repayments will cut into your business’s profits for the term of the loan. You’ll have to keep to a strict budget to avoid late fees or even defaulting on the loan, both of which can harm your business’s credit score.
  • The loan application process itself can be lengthy — and rigorous. If you’re just starting out in business and haven’t established your presence yet, your application may be rejected.


To avoid more potential drawbacks to your business loan, read all the application paperwork thoroughly before signing or submitting anything. Many loans carry fees hidden in the fine print that can take you by surprise.

In Summary

At the end of the day, you know your business model and your credit history better than anyone. If your credit is in good standing and you’ve got gutsy ideas to grow your business, a loan could be just what you need to catapult to success. Make business decisions that ensure brighter future years down the line.

Before you take out a small business loan, weigh the pros and cons and prioritize your company’s needs. A loan could be just what you need to build your business’s credit and achieve goals that would otherwise remain on the back burner.



Charu Mehrotra

Founder e-Magazine Womenlines, Entrepreneur,Unshakable Optimist. Subscribe