Obtaining a Business Loan

Problem Statement

The current economic trends have made it a challenge for every individual in society to get employment in the job market. Many individuals have found the opportunity to acquire either college or university education hence the job market is overcrowded. It is thus an indication that more creativity and self-drive have to exist among us in the society so that the idea of starting up self-employment bases can be achieved. Personally, I am a student at the university, and I understand that being employed doesn’t come quickly, and therefore I aspire to start my own business in auto detailing when I clear my studies, and that is one year from now. However, the initial capital to establish this company is a challenge that I am confident I am bound to face. Hence, I have to find a solution to the problem.

Problem Solving Alternatives

Regarding the challenge, I have come across many alternatives that can be beneficial in helping me realize the capital essential in starting up my business. Firstly, I have considered saving as an option. Thinking that I am still in school and my parents usually give me a substantial amount of money to use as my upkeep while studying, I can, therefore, take the initiative to save about three-quarter of it until I complete my studies. I hope by that time; I would have kept enough for the business.

I also considered the online lending option. As the years have gone by, Emekter, (2015) discusses how online lending has become a useful option in finding business loans. The process of requesting and receiving feedback for the credit usually takes minimal time, and the funds are often issued after a few numbers of days. My best choice for this alternative was the online term-loan lenders since they advocate for integrity and transparency in the loan application and also gives priority to small businesses. They offer best deals for starter enterprises, more reason why I considered the possibility of this site contributing significantly towards my financial challenge.

Angel investors are also another solid alternative that has gained massive support from the public over the years. According to Bammens & Collewaert, (2014), this option requires that you find certain individuals willing to invest financially in your business and return; they have twenty to twenty-five percent shares in your organization. I examined this alternative since investors are often significant people in the industry, and their experience in business operations will play a vital role not only in growing my business financially, but also expanding its services.

Finally, bank loans are also essential in establishing firms, and many individuals have made their businesses successful through them. Banks offer numerous types of loans for business, but I focused on term loans. They refer to bank loans that are usually provided in bulk and can either be paid in full or in installments. An agreement is made with the bank regarding interest charged and the fixed date that one is to complete repaying the loan. It is an excellent alternative for business, and if satisfied, one can realize tremendous organizational growth and development through the credit.

Evaluation of Alternatives and Solution Selection

After evaluating all the above alternatives, I realized each one of them had their advantages and disadvantages, but one option had to be selected. For instance, in the saving option, if I saved enough capital, I would start my business with fewer debts, which is an added advantage to the enterprise. However, I realized that there is a high probability that by the time I start the business, the amount saved may not be enough since I am still in school and depending on my parents’ money to keep the company. Hence I ruled out this option. On the aspect of angel investors, its most significant strength is that they will help start the business entirely by providing all the capital required. Though, in many cases, working as partners often has its cons especially idea conflicts and business decisions. Moreover, with time if the business thrives, the investors may want to take over the industry, and that is a risk that I as a person I am not ready to take. Therefore, this option is not the best in my case.

Bank loans, on the other hand, are advantageous in that after repaying a previous loan, one is at a position of securing another higher investment and this is a crucial benefit to a growing business. However, it is disadvantageous since one has to obtain the loan by agreeing that in a situation where they fail to pay the mortgage, their business assets can be confiscated by the bank, Berger & Black, (2011) writes. This is a dangerous risk since it will mean that the bank has to acquire my business if I fail to repay the loan. Finally, as much as online lending has its shortcomings such as possession of a decent credit score to acquire the loan, I settled on it since its benefits outweigh the banks and all the above alternatives. Online loans are fast and convenient, no collateral required and their interest rates are favorable. Additionally, one can manage the investment himself without having to consult with any business partner such as an angel investor.

Solution Implementation

Therefore, I aspire to apply for a loan from online term-loan lenders when I am done with my university education next year by offering them detailed information regarding my business prospect. Moreover, expressing my financial challenge to them will be essential by informing them all the operations required to make the opportunity successful. Establishing an operational location for the auto detailing business, the products, and systems needed and also catering for the business license are some of the tasks that require a massive amount of finances, and I hope the loan will be helpful. By choosing the online lending option, I believe I will be able to establish a stable business in future. Besides, I trust the outcome will be credible since with the capital, developing and facilitating the growth of the company will be achievable.

References

Bammens, Y., & Collewaert, V. (2014). Trust between entrepreneurs and angel investors: Exploring positive and negative implications for venture performance assessments. Journal of Management , 1980-2008.

Berger, A., & Black, L. (2011). Bank size, lending technologies, and small business finance. Journal of Banking & Finance , 724-735.

Emekter, R. T. (2015). Evaluating credit risk and loan performance in online Peer-to-Peer (P2P) lending. Applied Economics , 54-70.