Reasons why loans are not suitable for business

[Sotherefore]

Entrepreneurs who are not able to secured the required capital they needs in starting up a business might consider a loan as the best option. Well there are some advantage of getting a loan to start up a business and also at the same time there are some risks associated with loans most especially for new business start-up. These disadvantages of loans might overwhelmed the advantage that is associated with loans for business , which are as follows

* The first reason why loans may not be suitable for new startup business is the fact that paying back this loan will definitely draines your business : Here a specific period of time will be given for this loan to be paid back. Sometimes this period may not be enough to generate the needed profit to runs the business affectively. Trying to pays back the loan when you haven't generated enough profit means that you are likely to pays back the loan with the same capital you collected which might brings down a business.

* The general risks of business failure: A business you haven't start up before might be at risk of failure since you may not have a background experience of how the business really works. It may be more dangerous if proper arrangement was not done to aids the progress of the business . If failures sets in you could be at risk of being arrested or your collateral being forfeited if you are not able to pays back the loans due to unexpected business failure.

* The general stress associated with loans ; Securing a loan to start up a business comes with stress. You won't likely relaxed as you would also be careful to make sure you don't makes mistake that could possibly leads to business disasters. The overthinking, the fear and other negative emotions is not the best to the overall health of an entrepreneur.

Base on this point, I suggest raising the business's capital through hard works is the best options.

What other possible disadvantage do you think is associated with loans ? Feel free to discuss belows.

 

[Kingsley]

That's is indeed very correct, I have a friend who is currently struggling right now as a result of dabbling with loans in his small business, a year ago he told me of his plans of opening a shop and start thr said said drinks in crate and carton prices. And I asked him if he had done such before and he does not really have much ideas on that but had made some enquiries from experienced people in the business, and he said he had made up his minds to do it. So I gave him my blessings and he began sometimes last year in fact in less than 3 months the business was really booming and he began to add other products aswel. But sometimes late last year I began to notice hiw he was accessing loans mostly from loan applications and i was wondering why but he kept justifying his purpose of taking those loans. Now the loans have started to eat him and his business up. He virtually does anything without loans now. And to worse his capital is almost becoming principal to loans. And his profit are all calculated to pay up interest. Now I have adviced him not to go for loans again.

 

[Abigael]

These reasons sound so genuine. There are many disadvantages of taking Loan for a business. Which comes most especially to people who don't plan well before getting into business. They end up getting caught up in debt and a business that is not going well.

The most disadvantage being that you will be going through so much pressure and anxiety to pay back the loan. This kind of stress will hinder how you run the business. Most times, you will find that you are not really paying attention to the tasks that you need to do in order to achieve business goals.

Moreover, taking a loan when starting a business is not an easy process. Most loan lending institutions do not trust business startups. They mostly prefer businesses that are already established and are looking for money to expand the business. So if you only rely on loan to start a business, you may end up not succeeding.

Given these disadvantages, it would be best to start the business with other sources of income. This may include your own income, selling something that you don't use anymore or asking for funds to be raised from family and friends. That way, you avoid the hassles of starting a business with a loan.

 

[Kendy]

There are many reasons in which loans are not suitable for small or large scale businesses. There are other creative ways to source for startup funds for a business which could be through; opting for investors, empowerment programs, crowdfunding and through one's personal savings. There is no way in which loan could be the best alternative because the negative effect is always more than the positive impact. Taking of loans is very easy and accessible, coupled with the number of online loan apps which is not even secured or guaranteed because of the terms and conditions of getting all your details including the ATM card pin. Accessing loans from banks is also a way of getting loans although it include lots of paperwork. The bone of contention always emanate from the pressure to repay. As an entrepreneur who obtained loan in setting up a business, struggling with the repayment of loan and making the business venture to have a good foundation would be the aim, which indeed is pressurizing. Most individuals who obtained loans in setting up their businesses do not have a good story to tell and coupled with the economic situation which has made customers limit and minimize the way they spend or purchase products.

 

[funmi]

Loans are indeed not suitable for business mostly at the start up stage as it just ends up decreasing the opportunities of the business growing. What interest loan does is to kill the profit of the business and this also affect the business owner psychological as even the capital that is with the business owner will later become the principal that will be paid back. I was working with a lady that was well to do financial but I later discovered that she was accessing loans somewhere and I made that discovery when she told me that she needed my assistance and wanted me to stand in for her as her guarantor. That was when I knew she was still accessing loans to.support the business despite all the funds she gets from her husband who is also earning so well. After some.years I had to relocate. So I later checked on her to see how the business is doing. But to my greatest amusements the business had folded up because she later got seriously indebted and was forced to shutdown and her husband was seriously disappointed because he never knew the wife was accessing loans and he decided to withdrew his support.