5 proven reasons not to start a business on loan

[Augusta]

It is can be a delight to plan on getting a loan from either a bank or a financial house to start your business. But you need to consider the consequences that come with taking such a decision. They include the following:

• Consider yourself a debtor till you are able to remit the last cent of the loan
• Loans especially from banks comes at a high interest that might drown your profit
• You will be in deep stress, if you can’t meet up with the repayment plan
• You wouldn’t be able to operate the business at your own pace
• Your business might not still be functional after payment of the loan, since you might still need more money to operate

 

[Lyrrex]

It's never a professional advice to start a new business with a loaned money. From my own personal experience, my elder brother got a loan of about $30k from a bank to start a fast food and restaurants in the a major outskirt of town. Just two months of setting up the business, the covid-19 pandemic bursted and all the businesses were on a pause. Now business had resumed, but he has less than 7months to pay up the loan or have is land would be taken by the bank.

 

[Augusta]

It's never a professional advice to start a new business with a loaned money. From my own personal experience, my elder brother got a loan of about $30k from a bank to start a fast food and restaurants in the a major outskirt of town. Just two months of setting up the business, the covid-19 pandemic bursted and all the businesses were on a pause. Now business had resumed, but he has less than 7months to pay up the loan or have is land would be taken by the bank.

You just stated the reality and this is what a lot of borrowers from the banks or financial houses faced. You will be under unnecessary pressure should anything go wrong with the intended business. For me I think it would be wise to seek financial help from friends and family members so a little help than starting with the banks. One can o
Lose a fortune in a process like this. Getting a loan works better with an already existed business

 

[Alexandoy]

To be honest, I really don’t know how you can do that here – starting a business with a bank loan for the capital. First off, you need a good collateral for the bank loan. Second element, you have to show proof of the capacity to pay. If it is your business that will pay then you have to show that it is earning a good profit. But since the business is a start up that means you will have no document to show that it had paid at least 3 years of taxes. That will automatically disqualify you for the loan.

 

[Asad Ali]

Absolutely great post. You should never start a business without borrowing.Yes, but if the business is running, you should take a loan for investment in it

 

[Augusta]

Absolutely great post. You should never start a business without borrowing.Yes, but if the business is running, you should take a loan for investment in it

You got the whole idea in few sentences. Starting a business with a loan is a wrong move for a new business owner because you would be stressing self so much that you become drained and when once this set in then running the business smoothly wouldn't be possible. For me borrowing from friends or sling old things to raise money will be a lot better. High interest on the loan can even ground the business before it even starts. So precautions needs to be taken to stop this

 

[Seyesystem]

Starting new business with loan May not be good for some people and it may be good for some people whichever way. I can't advise any person to start business with loan but if you are very sure of the business that you are going into which you know that is viable and profitable the person May go for loan since that is his last option of getting capital to start the business.Getting loan to start a new business is common when you don't have enough capital but Sometimes it's difficult to repay loans especially when there is decrease in sales.There is nothing wrong to get a loan for a new business once you know that the business is viable. So many big business that you here there name globally started the business with loan. Once you carry out your market research and feasibility study of the business and you are very sure of the profit projection of the business you can get your loan and start the business. Business involves risk taken I hope you still remember the higher the risk the higher the return. If you are very sure that the business is viable I will advise you to get the loan for the business.

 

[Aqsa Shahid]

Never start a business with loan as if your business will be proven unsuccessful then it will be very harmful for you financially. Then you will not be able to give loan back to the person. Sometimes, it probably happens that many skillful people also sees loss in their businesses as Destiny matters alot in a person's life.

 

[Donkiz]

It's important that anyone who intents to start a new business to think of ways to raise the needed capital to kickoff the business without collecting loan from any institution, whether bank or other financial institutions.

Most new businesses takes time to start making profit, and in some businesses the owner is required to keep supporting the business financial for months before it stabilizes. So if the business was financed using a loan, it will be difficult to start paying back the loan when the business have not started making profit, thereby putting much pressure on the business which might lead to closure.

 

[Deleted member 28873]

It not advisable to start a business with low profit margin with a loan.It not also advisable to start a business with high risk with a loan imagine you starting a business where you sell breakable things if there were to be an accident you would be in great debt.It not really advisable to start a business with a loan without properly researching your market very well

 

[Doradorwa]

When you first start out on your journey, you probably have no credentials and no references for a supplier to take a chance with you on a credit basis, and so the only option is to have some funds up front.
This is where some people begin to toy with the ever romantic idea of a business loan.
Now, I am not dead set against the idea of business loans per se. If you already have an established business and you’re looking for capital to grow, then that is a different situation all together. However, I feel that if you are just starting out in a new business, the last thing you want to do is to tie yourself up with a business loan.