Things to consider before taking a business loan
Business ideas keep coming up here and there and we never seem to have enough of it, more than ten people living in the same geographical area seem to have a multibillion business idea, a lot of people just want to quit their jobs and start working on the business idea immediately because they have a boss that keeps frustrating them.
In order to turn this multibillion business idea into reality, cash is required and most often the cash required is not just available, the zeal is there and family and friends are not able to support but there is an assurance that this business idea is real and it just requires fast execution. A friend then suggests that you take a business loan to get your plans come into reality, which sounds like a perfect idea right? After all, your business idea is good enough and you will pay back the loan in less than twelve months.
Is it really a good idea to take a loan for a new business idea?
No matter how well you study about business, a real field work is required to show certain skills books will never show, it is rather easy to get some cash and spend it on renting a store and filling it up with the things you feel people might like but at the end of five months, it turns out your multibillion idea is not acceptable by the market. It is fine for some of this mistakes to happen in business and it is on a fair side if the finance was from personal savings or support from friends and family but if the loan was taken from a bank or any other financial institution, I am sure you know that is not so good.
Taking a loan for the purpose of starting a business can be compared with putting yourself at risk for a total stranger, I believe that if you have to keep saving to start the business, then it is better to take your time and save properly in order to be able to start the business.
Since failure at the beginning of every business is very common, it will be less painful if the money had come from your savings but if it had come from a loan, you will be giving up too much and it is going to be really heart breaking because apart from losing your business you also need to look for a way to pay back your loan.
What about taking a loan to increase the capacity of an existing business?
A business should be increased only when you have totally used your current capacity to the fullest. For example, you may have a coffee shop where you sell ten cups of coffee every morning but when you realize you have a daily long que of customers who want to take coffee every morning, to retain your customers you can get more coffee makers and workers on a loan because you are sure of being able to pay back the loan and your business growth does not say otherwise.
I agree, the ideal before starting a business is to try to get as little debt as possible and even more with the banks, I know that they charge very high interest and in the end you end up paying a higher amount than what they actually gave you, then what you could take advantage of to reinvest in your business you end up paying the bank. Bad idea!
Thanks for the contribution Sis.
@eni-ola we have to al most care before taking any loan , as we have to pay it back with interest , we have to do all our due diligence regarding the same about it.
Plus sometimes we might use all the profit made from the business entirely to pay loans which is a very terrible idea.
nice
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Hello, your article is very interesting and there is a lot of useful information here. A loan to start your own business is quite a risky move, but there are certain companies that, with their conditions, greatly reduce the risk of bankruptcy even if you do not repay the loan on time, such as Sagemore Financial. They have a lot of cool business loan services. If suddenly you decide to take a similar service, then I advise you to do it only from them.
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