Every business needs some financial help at one time or another. Whether you need the money to remain afloat or to move your business to the next level, approaching a lender can be a daunting task. There are a lot of pitfalls down the road that could put your business at a tough financial position. Applying for a loan to help you out is a crucial financial decision that should not be taken lightly, ensure that you approach a potential lender with a well-researched agenda. There are a lot of loan options available for you today, some having more benefits than others.
Stock loams today are very popular because of their low risk and flexibility. A stock loan is also referred to as securities lending and it is the process of borrowing money using the shares owned in a publicly traded company. Securing funding through stocks is a better option than the traditional borrowing options and we will be looking at the reasons why in this article.
Firstly, stock loans will give you flexibility. As a business owner, you have the freedom to use the money extended to you for any purpose. You cannot get this much freedom with traditional loans such as mortgages or auto loans because the lender, in your agreement tells you what to do with the money you are given. If you have a lot of expenses, some of which do not relate directly to your business, a stock loan will be the right choice for you.
Another reason why you need to consider applying for a stock loan is that their interest rates are relatively low and they are fixed. When compared to other types of loans, stock loans’ interest rates are lower. The interest rate you acquire your stock loan with will remain constant despite fluctuations in the market. Fixed interest rates are important because you can plan on how you are going to repay the loan with ease.
Stock loans also give you more value than the traditional loans. Lenders offer a higher cut off margin in stock loans than in the traditional loans. This is beneficial for business owners who need a substantial amount of cash because they can get it all from one loan.
Finally, there is no recourse action with stock loans. Stock prices fluctuate often and changes can occur very fast and unexpectedly. You can maintain ownership on yoir stocks and still get funding for your business if you feel that they will appreciate in the future through stock loans. Most lenders will agree to a non-recourse agreement when you apply for a stock loan meaning that you have the right to terminate your loan should stock prices rise and have no harm on your credit.