Five Reasons Not to Take Out a Business loan

[Hammad1245]

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.

Yes, it is very dangerous to take a loan at the beginning of the business. You don't have enough experience about the business and you return money with interest. Therefore, do not take this risk.

 

[Psalmsavatar]

Business loan will reduce the profitability of the business. It reduces the trust which the entrepreneur will have on the business. It creates unavoidable spend from the business running capital. It exposes the business to early bankruptcy. It kills the business morale.
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Business loan will reduce the profitability of the business. It reduces the trust which the entrepreneur will have on the business. It creates unavoidable spend from the business running capital. It exposes the business to early bankruptcy. It kills the business morale.

 

[Kamon c4]

This write up is comprehensive and well detailed. Though it proves a powerful point but I’m still not convinced that loan isn’t a good way to fund a business. Loan motivates you to succeed in your business though the risk involved is very high.

 

[Abbeyola]

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.

Starting a business with a loan is a very risky thing to do because you didn't know how soon the business will flourish and blossom ,so it may end up to lead to bad debt. The best thing is start a business with your own personal savings. Then when the business flourish and you need more capital you can go for a loan. And the interest rate then will not be an issue.

 

[btaliat]

Taking loans is not compulsory and only necessary for expansion of business. I don't really advice people to take loans for starting up a business. It may hinder the growth of the business if the loan is not repaid on time. Besides, the interest may be high.

 

[Nicklas22]

Yes, you have to researched and thoroughly have enough knowledge about any business before going to take a loan to start it
If you don't have total knowledge about the business you it my ended up failing and you will be in debt

 

[pepper gee]

Taking business loan can be very frustrating when there is no sales and you are unable to pay,so before taking a business loan you have to take a research so as to know if you would be able to pay the money within the given period of time

 

[Damismiling]

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.

I always tell my friends and colleagues that one of the worst decision to make when starting a business is to start with a business loan, you mind is always in how to repay, a slight mistake might jeopardize the business, so the best thing is to start with the available capital or source grants from friends and family.

 

[Psalmseen]

A loan for other purposes is good but loan to start a business is bad. Because taking up a business itself is risk and the prospect or success can not be determined at the initual stage of the business.. And if per adventure, the business fails, the loan would be a debt on the part of the business owner.

 

[Thosynho]

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.

You have valid points outlined here and well explain as well. Many people just rush to get loan to start up business they have never researched well on. They obtain the loan wasted it and have debt to pay.

 

[Kingsley]

Business loans can be very challenging because of the interest charged on loan, and again the time duration of paying back, and sometimes the disturbances that comes with the collection of the loan, the economic situation can make payback very difficult and lastly debts from customers.

 

[Oluwagbenga]

Five reasons not to take out of Business Loan .
1)It may cause a misunderstanding

 

[mubinadaddy]

Your point are very vital in this business world, taking loan when starting a new business is not idea to buy into cause anything can happen that you will start having repayment issue which might affect your business and lockdown

 

[Oluwagbenga]

Five reasons not to take out of Business Loan .
1)It may cause a misunderstanding.
2)It may affect the business .
3)it may affect the profit you are Making out of the business.
4)it may affect the employee.
5)it may affect the family of the business owner

 

[Akinwale701]

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 doesnt 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 a loan is one of the very dangerous things to do nowadays. Most of these loan companies are out there to cheat you of your hard earned money. If care is not taken they use your card details saved with them against you. If you don't pay on time, they send messages to your contact that you're a defaulter.

 

[Talibhussain074]

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.

Thank you so much!! You have given very good reasons Borrowing for business. You have explained it very well. It's not a bad thing to borrow. Loans are very profitable for business if you believe conditions will expand your business. These are very helpful in business expansion and development. And if you are badly borrowed and your business does not run, then this is very harmful to you. Ups and downs in business keep going you have to bear.

 

[George10640]

Wow those are some good points to stick with for those willing to take loan.Loans are very critical and needs to be taken seriously. The most determinant is how you take and manage your first loan in the business you running. If you able to handle the first loan then handling consequent loan will not be a problem.

 

[WhiteHouse]

The accompanying counsel might be valuable to small and big business owners who want to take a loan

1. Try not to acquire over 25% of your complete working capital from a bank. At such degrees of advance, it would be simpler for you to reimburse on schedule.

2. Try not to utilize bank's credit to fund a speculative business which has a high likelihood of disappointment. For example Utilizing bank credit to stock an item like palm oil, expecting to sell when the costs climb. Imagine a scenario where the costs drop down.

3. Try not to utilize bank advance to import transient items like fish and organic product squeezes or even medications. Postponed shipment or mechanical disappointment could prompt the item waste and an enormous monetary misfortune.

 

[hominchen]

I will highly suggest not to take loan for business or any purpose. Mant people ended gheir lives and taking interesr is a major sin. So griwing naturally with whatever one has is very good proceeding which i respect.

 

[Irfanali]

But there are also many bad reasons to take out a loan.
...
These are five.

Start a new business idea before you research it thoroughly. ... Your credit cards and credit lines have grown. ... You can't afford to buy continuity. ... You saw an ad or received an email about unbeatable interest rates.