Five Reasons Not to Take Out a Business loan

[Niolaxx]

Getting loans to start a business is particularly dangerous as u do not know if the business will thrive or not,it makes one a slave to the lender,instead of using your profit to expand the business,you use it to pay debt which will cause poor growth to your business so I feel that taking loans to start a business is not the best possible idea to start a business

 

[Tollytee]

• 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.

 

[Herzhan]

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.

You are very right my brother. There is probability that loan you take to boost your business might end up draining your business because you will be eager to pay the loan back and have extra money at hand. You will be forced to do things that could cost loss to your business.

 

[Hasan Raza]

A nitty gritty reasons you have plot there. The most pertinent explanation behind me is that, on the off chance that you won't repay the loan, at that point you shouldn't take it in any case. Besides, check what the loan cost is, if it's excessively high, I would prompt you not to take it as well.

 

[Rainlover207]

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.

 

[Hdre3m3n]

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.

This post is a very important one. I have always thought if convincing a friend of mine that is planning to obtain loans to start a business he doesn't even know much about. I think this post will help me better

 

[idhans]

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.

Taking loans for a new business can be so dangerous and if you are not careful you might lose the whole capital. Over here in Nigeria interest rate are so high, and you must do your research very well in order to help you know whether to collect the loan or not.

 

[Ralphjoe]

All these really justified that reasons why someone shouldn't take loans especially for a new business that hasn't been established. I totally agree with all your point. I have always had the opinion that taking a loan to start up a business is not advisable but taking a loan for the business to expand the business is good up

 

[Olamide wealth]

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.

 

[Khezo]

This are all nice points, I don't believe in taking a loan for anything myself because paying back loans are always very stressful not just for me but for anyone. So borrow from a family or friend with that you would have longer time to pay back the loan

 

[Onachukwu]

Business assets that can be used to create products or services and which can be turned into cash to make payments on business loans. A new business, especially a service business, has few business assets.

 

[Alexandoy]

I see only 1 reason not to take out a business loan - when it is not for the purpose of expansion or growth. Some business owners would take out a loan to buy a new car for his own use. My brother did that when his business was growing. He bought 2 cars, for him and for his business partner. After a few years they each bought a van. Those purchases were on the bank loan that they used their credit line. That somehow hampered the financial well-being of their business.

 

[WhiteHouse]

In this kind of situation, the loan will be a good debt since you are using it to fund your business which in turn will boost your overall sales.
As long as you are using the loan to advance your products and services then go for it

 

[RETIRED SINNER]

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.

I once tried to convince my folks to take loans to improve our family business but everyone rejected the idea it kept me wondering if taking loan to improve a business is bad, because I know for u to keep ur business updated cash is needed and most times businesses do not produce enough cash for it's improvement hence cash injection is required

 

[Afrinish]

If you run a business start up, in the beginning of the market value, things will be tight. You may dream of all the things you could do with just a little more cash and other currency for easy pay . While small business loans are great in the right situations, there are specific instan for the investment.

 

[Usman Sattar]

It's nearly impossible these days to keep a small business running with money drawn from your own pocket. Whether it's purchasing inventory, hiring new employees, or opening additional locations, any type of expansion requires extra working capital.

The fact that it's becoming increasingly difficult for small business owners to secure funding through a bank makes it even more challenging. There are a variety of reasons why banks are.

 

[Rimsha kanwal]

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

 

[Judee201]

Getting a loan is good in itself as it can be all your business needs to grow, but it is also an expensive and delicate move. The more loans a business take, the more business debts it incurs overtime. Which is why taking a loan is quite a risky move if you're a small business owner.

 

[Axad. Mrb]

The most common reasons small businesses fail include a lack of capital or funding, retaining an inadequate management team, a faulty infrastructure or business model, and unsuccessful marketing initiatives.
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The most common reasons small businesses fail include a lack of capital or funding, retaining an inadequate management team, a faulty infrastructure or business model, and unsuccessful marketing initiatives.

 

[Eyiteepraise]

Taking a loan to start a business is very risky, it is not advisable to start a business you're not even sure of it success with a loan. It is better to start with a little capital rather than imposing pressure on your business with loans