“A great loan deal is not, in itself, a good enough reason to borrow. Unless you have a clear need and purpose for the cash, and a plan as to how you will repay it, hold off on borrowing.”
Are you launching a new business idea too early
It’s easy to get carried away and take out a loan before you are ready to actually spend the money you borrow. Timing a loan perfectly is vital. Not only will you need to be able to show potential lenders how you are going to spend the cash and how they will be repaid, but you may need to start repaying the money immediately.
Because you saw a good deal on a loan
A great loan deal is not, in itself, a good enough reason to borrow. Unless you have a clear need and purpose for the cash, and a plan as to how you will repay it, wait until the time is right. As long as you do some research, you will find another great deal when you are ready.
Because you need cash to pay off other maxed-out lines of credit and are struggling financially
Borrowing more and more is not the solution to your business’s financial problems. In fact, adding another loan to a long list of borrowing will just intensify your problems, making them spiral out of control. There is a wealth of government-backed support out there for struggling businesses, so it’s important to seek advice if your company has debt problems and see if you can fix the underlying issue.
To fund an impulsive property or equipment purchase
Borrowing money to fund any kind of impulse-buy is not a smart move for a small business owner. Any borrowing decision or major purchase should be fully considered with regards to your wider business growth strategy.
For any purpose that has not been considered in terms of return on investment
When you are taking out a business loan, you need to consider whether the returns expected from the investment make sense when compared with the cost of borrowing. No matter how small the purchase or expense, think through how it’s going to pay its way.
To conclude…
To some, taking out a business loan seems like a risky strategy that could land your business in financial trouble. However, if you have researched business loans, know about the different types of business loan and you are ready to borrow, but are missing the working capital to do so, taking out a business loan could be a good option.
In order to reach new heights with the help of a loan, it’s absolutely essential that you research all the options available to you as a borrower. You also need to ensure you can afford to repay the loan and that you have a clear purpose for the money once it’s in your bank account.
