Five Reasons Not to Take Out a Business loan

[Doradorwa]

Every business needs extra cash from time to time, and there are plenty of good reasons to take on debt: to launch new products, expand your business, or purchase needed inventory. But there are also plenty of bad reasons to take out a loan. Here are five.​

1. To launch a new business idea before you have thoroughly researched it. Fads come and go; the goal is the find one that sticks. Before you decide to buy into the latest fad concept, spend some time doing market research and deciding whether or not the concept is a good match with your experience and interests. Many people think that owning a restaurant is glamorous but find out later that it is very hard work. Do your homework before you take on a serious financial commitment. Should You Personally Guarantee a Loan to Your Business?
2. Your credit cards and lines of credit are maxed out. If you have exhausted all other available credit, maybe taking on more debt is a bad idea. When lenders see that you are overextended, you will likely be required to secure the loan with assets. If you are having difficulty paying your existing financial obligations, you are entering risky territory by gambling with your facilities, inventory, equipment, or even worse, your own house. Read more about Cleaning Up Your Company’s Bad Credit Profile.
3. To make an impulse buy you can’t afford. Perhaps there is a new technology or machinery you think would benefit your business, or maybe you want to remodel or upgrade your facilities. While all of these things may prove advantageous to your business, you won’t be able to reap the rewards if you have leveraged all of your assets and the extra profits you make go toward repaying the loan. If the idea doesn’t bring in extra revenue, you are still responsible for paying back the loan. If you used assets to secure the loan, you may end up without a business at all.
4. You saw an advertisement or received an email about unbeatable interest rates. As the old adage goes, if it sounds too good to be true, it probably is. And on the outside chance that it is true, just because you can get a great interest rate doesn’t mean you should.
5. You want to consolidate your debts but haven’t learned how to budget. Maybe your company is going through a tough time, or maybe you have mismanaged your company’s finances and are now looking to consolidate all of your debts. Debt consolidation may ease the pressure temporarily, but you need to address the underlying problem if you want your business to succeed.

 

[Niftyyem]

You have made very good points and I agree with every one of them. I do not believe in taking loan for start ups and using loans to pay off debts. Loans can sink a business, so, it is better to avoid them as much as possible.

 

[Dorcey]

Personal loans are no longer offering borrowers a good deal. In fact, the banks are looking more cautious than ever before when it comes to unsecured lending. Earlier this year, lovemoney.com partner Moneyfacts, revealed that despite the bank base rate standing at a record low, rates on loans had climbed to a nine-year high. And this trend appears to be ongoing, particularly for smaller loans.

 

[iCesarkevin]

If you run a startup, in the beginning, things will be tight. You may dream of all the things you could do with just a little more cash. While small business loans are great in the right situations, there are specific instances where they can be more of a drawback.
1. You dont have extra for emergencies

 

[Gilead]

I totally agree with everything you've said here. Taking loans to start a new business is a bit dangerous. Especially when you don't have experience in that field or you didn't conduct a proper feasibility study.

 

[Ridorz]

You are right, you really made a point of what you said. Getting a loan to start a new business is not a good idea and it's not advisable. I can not ever borrow money because of opportunities shared to me through email or I seen it online, because not every sites are legit.

 

[Adebayonle7]

This are nice points and very helpful tips and in depth explanations. Loans can be helpful at the crucial stage but can also be very difficult to pay off especially when it's not from a trusted source and they can change their agreement or policies guiding the interest. More alarming reason is for it to be used for the wrong reasons especially when the business doesn't have a plan or when it has one that is not reasonable enough or the bisiness model and revenue streams aren't well laid out to bring the revenue enough to pay off debt and get profits needed to carry on the business.

 

[Samuel77]

According to my own point of view, the five reason why I am not going to take out a business loan is first because I believe I will not be able to pay back the loan at the right time, because I don't have shorty, because I don't have collateral for the loan. The

 

[EMMANUEL]

• Poor credit history and low cash flow can prevent business from securing loans.
• Before applying for a business loan, make sure your financial documents are in order and that you understand what lenders need from you.
• A good business plan makes your business attractive to lenders, giving you a better chance of getting a loan.

 

[Shakeel5676]

Every business needs extra cash from time to time, and there are plenty of good reasons to take on debt: to launch new products, expand your business, or purchase needed inventory. But there are also plenty of bad reasons to take out a loan. Here are five.

 

[Dubai]

A detailed reasons you have outlined there. The most cogent reason for me is that, if you will not be able to pay back the loan then you shouldn't take it in the first place. Secondly, check what the interest rate is, if it's too high, I would advise you not to take it too.

 

[Kelvin7656]

there are also plenty of bad reasons to take out a loan. But this are the few I know.

• To launch a new business idea before you have thoroughly researched it. ...
• Your credit cards and lines of credit are maxed out. ...
• To make an impulse buy you can't afford. ...
• You saw an advertisement or received an email about unbeatable interest rates.

 

[Roysnickz]

Every business needs extra cash from time to time, and there are plenty of good reasons to take on debt: to launch new products, expand your business, or purchase needed inventory. But there are also plenty of bad reasons to take out a loan. Here are five.​

1. To launch a new business idea before you have thoroughly researched it. Fads come and go; the goal is the find one that sticks. Before you decide to buy into the latest fad concept, spend some time doing market research and deciding whether or not the concept is a good match with your experience and interests. Many people think that owning a restaurant is glamorous but find out later that it is very hard work. Do your homework before you take on a serious financial commitment. Should You Personally Guarantee a Loan to Your Business?
2. Your credit cards and lines of credit are maxed out. If you have exhausted all other available credit, maybe taking on more debt is a bad idea. When lenders see that you are overextended, you will likely be required to secure the loan with assets. If you are having difficulty paying your existing financial obligations, you are entering risky territory by gambling with your facilities, inventory, equipment, or even worse, your own house. Read more about Cleaning Up Your Company’s Bad Credit Profile.
3. To make an impulse buy you can’t afford. Perhaps there is a new technology or machinery you think would benefit your business, or maybe you want to remodel or upgrade your facilities. While all of these things may prove advantageous to your business, you won’t be able to reap the rewards if you have leveraged all of your assets and the extra profits you make go toward repaying the loan. If the idea doesn’t bring in extra revenue, you are still responsible for paying back the loan. If you used assets to secure the loan, you may end up without a business at all.
4. You saw an advertisement or received an email about unbeatable interest rates. As the old adage goes, if it sounds too good to be true, it probably is. And on the outside chance that it is true, just because you can get a great interest rate doesn’t mean you should.
5. You want to consolidate your debts but haven’t learned how to budget. Maybe your company is going through a tough time, or maybe you have mismanaged your company’s finances and are now looking to consolidate all of your debts. Debt consolidation may ease the pressure temporarily, but you need to address the underlying problem if you want your business to succeed.

Sure, you have good, well explained. Loans are actually good for businesses, they help in business growth and expansion. But the down side is that loans can actually kill your business if badly taken

 

[tyrim88]

Taking a busness loan can be very burdensome and strangle the busness,especially if the busness is a new corporation and has not gotten the experience and rigour associated with the competitve busness environment.when a well laid out plan has not been made out on how such loan can be rapaid,the busness can quickly go down.And even when a well laid out repayment plan has been laid out on how incom cn flow in,some factors that cannot be explain due to the nature of the business and client reaction can alter whatever strategy you have laid out.

 

[Sariana23]

Here are five powerful reasons why you should not apply for a business loan. Many entrepreneurs do not measure the consequences of borrowing the business. That is why it is always good to have a financial advisor who stops that impulsiveness that characterizes many people in charge or business owners.

 

[arrain3786]

If you're confident the opportunity will expand your business and put you in an even stronger place financially, consider taking out a loan. Many reputable lenders offer application processing times of a few days or less. If this golden opportunity seems like a perfect opportunity to expand, get moving

 

[Ibrahim1]

As for me it hasn't been easy taking business loan and I won't buy the idea taking business loan because I won't able to pay back on time and also I won't able to rest and start thinking over the loan also the interest is what I hate most and it's not also helping because they going to collect the interest that should be ur own and be there own

 

[Zamaney]

Taking out loan to start a business is not good I never see anyone achieve from it it doesn't matter how well financial you are as long as you start with little in your hand your business will grow gradually

 

[iamgroot]

A very important pointers and dense information you shared. You are right about the loan, even if borrowing works for others to do business and succeed, often the opposite happens. Often those who have built a business through borrowing are even more depressed because the business they built did not click so what happened is that they went bankrupt, they still have existing loans that need to be repaid. So, as much as possible, build a business that comes from savings so that just in case something goes against what you want, you will have no debt to think about.

 

[Osaz96]

Taking out loan to start a business is not good I never see anyone achieve from it it doesn't matter how well financial you are as long as you start with little in your hand your business will grow gradually

The borrower is always the slave to the lender, borrowing to start a business for me is not a good idea, I feel it puts you on the edge and you have only one thing in your mind which is to pay your debt, this mindset makes you not concentrate on the growth of your business.