Factors to consider before getting a loan for your business

[Augusta]

Getting a loan to grow a business might just be what's on your mind when once you believe you need to expand your business but you still need to take our time to evaluate the loan you want to obtain. You would need to use the below points to evaluate the loan .

First check the reputation of the loan lender. it could be a red flag if the person has no physical address and is trying to hide the fees for the loan. You need to be careful here.

Secondly, check the collateral involved with the loan if it will worth giving such for the amount of money you would be obtaining. Remember that the collateral would be auction if you default in payment.

Thirdly, look at the repayment plan. be sure it suits your kind of business and that you can make the payment without ruining the financial stability of your business.

next, is to look at the loan interest and fees. This is the most of them all be sure you are very comfortable with this part and it wouldn't affect your business before indulging.

lastly is to look at the amount to be borrowed you should be sure that the money you are trying to get will be worth the stress of borrowing the money..


Add your thoughts

 

[Good luck]

All the factors mentioned above are quite reasonable when it comes to getting a loan for one business but one thing that is certain is ,you must be very careful so as not to have problems when it comes to paying back especially when the interest rate is very high and the bank policy changes affecting what you are supposed to pay and you can't meet up .Your business will be seriously affected.Make sure what you are putting down as a collateral will not be more than what you are collecting from the financial institutions.You must be wise so that the loan will not affect your business.

 

[Kingsley]

The talk of loans has become the order of the day in Nigeria people scramble for loans for so many reasons besides just running a business. Due to the economic situation in Nigeria we have realise that people can not survive on their own, feeding a family of three children with a three square meal has become a serious challenge let alone pay their school fees and other expenses that is related to a family concern. When we consider the inflation rate and how it has madly affected the prices of commodities in the market we may begin to wonder how people is even coping right now because it is indeed horrible experience. Hence people sometimes claims to access loans for business purposes but at the end they get to spend it on other expenses which is not related to the purpose at which they went for it initially. Again we may not want to blame them because survival is always the first thing that comes to their minds.

Well that said we must try as much as possible to consider our business first before accessing loans and we must try as much as possible to consider the strength of our business before starting the business.

 

[Abigael]

Those are very good points on what to consider before taking a loan from a loan lender. It is very good to examine the person or organisation lending you the money. If they are a bit suspicious, then you should steer clear. For example what you have mentioned about one hiding the fees is a clear red flag. They could be planning to exploit you.

Then also check if you are really able to pay back. That is, the interest rate should be too much. Some loan lending companies, especially the private and non official ones like the shylocks usually exploit people alot by putting their interest rates to be insanely high.

Moreover, you should really ensure that there is security with who you borrow. Some people and companies usually end up threatening the life of their borrowers when they default even a bit. Therefore, only borrow from people and companies who will not threaten your life when some circumstances in life lead you to default.

Another important thing to consider when borrowing a loan is your own capacity to pay back. This is very important if you want to have a good financial stability. If you assess yourself well and what effort you are willing to give, you will know whether that loan suits you or not.

 

[Caramelle]

Although it is usually preferable to grow a business using its own profits or through the capital infusion of its owner, obtaining a loan may be the only solution for rare business opportunities that are worth the risk. There are diverse sources of funds and the business owner will have to consider several factors before concluding a loan contract.

The cost of debt is one of the major factors to look into when deciding on the loan provider. A business owner will most likely choose the loan with the least interest rate and fees. One possible source of a low-interest loan is a government bank that specializes in business development loans. Other loan sources may require collateral. Some lenders may not require collateral but the interest rate could be higher than usual to compensate them for the risk of granting an unsecured loan.

The repayment period should be considered as well. The periodic payment should match the timing and expected cash inflows of the business in order to avoid potential liquidity issues that could eventually lead to default.

The terms of the loan should be thoroughly reviewed. The borrower should be aware of conditions regarding default and delays. Some creditors may impose harsh conditions in cases of payment delays. A slight delay in payment could be considered as default which can make the entire loan due and demandable.​

 

[PICKFORD]

Before thinking of collecting a loan from a bank to accomplish a particular business idea or to invest in a well researched proper investment platform call website. Your primary and first thought must be on how to repair the lenders. If at all there is no way in which you think of repairing them then it is proper not to collect the loan neither. but yes there are a lot of employers managers and entrepreneurs whose do you go ahead to accept loan in which they cannot repay some even go as far as to collect loan that are of huge amount but at the end there can't repay back leading to bankruptcy and business failure.

another thing to consider before collecting a loan from a bank is there aspect of guarantee, if you have a special guarantor or as well as a kind of collateral in which you can use in exchange of the loan then you can accept a loan from a bank but if not attend advisable not to even think of accepting a loan from a bank because the absence of collateral could lead to various distress if at all you are not able to repay the loan.

 

[Chibson]

Valid points, it is very important for you to make a very good research want to take any loan from any lender whether it is a bank or a traditional loan lender. some people make the mistake of taking loans without properly doing research about the reputation of that institution and they end up going bankrupt because of breach of agreement. I have seen a situation whereby the image of someone was tarnished by a loan up and it is very important that people avoid such at all cost. The loan app sent messages to all the contactts of the borrower telling them that the person is a criminal and they should not do business with such person again. This is very disheartening and a lot of people must do everything possible to avoid this. It is advisable that people read the terms and conditions of some of this loan apps before they try to take any loan from them because they may end up tarnishing your image, if you do not meet up with the deadline. So reputation of a lender is very much important for you if you really want to take a loan to venture into any business. it is also important for you to check whether they are registered or not because of any of them are illegal.

 

[Alexandoy]

For me, the first step in planning to get a business loan is the financial condition of the business in terms of revenue. If the loan is for the expansion then I would agree to that. When the business is losing money the loan would only aggravate the situation. You have to remember that the monthly installment for the loan payment is a big responsibility that your business should handle. If the revenue of the business will not increase then the loan will only add to the burden.

As for the lender, I am against borrowing money from individual lenders because they are usually one-sided with the deal. You have to pay a higher interest rate and there are fees to be paid too. Getting a bank loan is the best because banks charge a much lower interest rate. When we got our mortgage for the house that we purchased the interest rate per year was 15% only and it even went down on the following year.

 

[Sotherefore]

Personally I do not consider any factors when trying to get a loan or to do anything with a loan because I will purposely refuse not to engage myself with loans in any business I am doing , and I will always try as much as possible to raise the money that I need to establish my own business because to me that's just the best way to start up something .

Getting a loan may not only be risky but may be bad and put you in a lot of financial stress and stressful thinking of how you will be able to pay back the money you have collected which is something I do not want in my life , because I value my peace of mind more than any other things.

Even if I have to get a loan for any reason to start up something I must really make sure I have a constant , I mean hundred percent constant way of generating income to pay back the money I have collected , this will be an external source entirely and not really from the business I have gotten the loan to do , because to me if I am getting a loan to do any business I must always have an external source of income to pay it back

 

[btaliat]

You are right based on the factors that you wrote but the fact is that loans should not be considered as a means of funding our businesses. This is because there are many problems that are associated with obtaining loans than the benefits that one may experience.

For instance, there is no assurance that a business will be successful even if there is solid feasibility. Most time, there are more than having feasibility studies to determine the success of a business.

Also, there may not be peace of mind for an intending business owner that is running his business on loan. He won't comcentrate more on the business success rather he will concentrate more on the repayment of the loan.

Borrowing always begets borrowing until one becomes a perpetual borrower. There is need to put find other ways to fund our business rather than the loan.

 

[Ebenn3]

Getting a loan to grow a business might just be what's on your mind when once you believe you need to expand your business but you still need to take our time to evaluate the loan you want to obtain. You would need to use the below points to evaluate the loan .

First check the reputation of the loan lender. it could be a red flag if the person has no physical address and is trying to hide the fees for the loan. You need to be careful here.

Secondly, check the collateral involved with the loan if it will worth giving such for the amount of money you would be obtaining. Remember that the collateral would be auction if you default in payment.

Thirdly, look at the repayment plan. be sure it suits your kind of business and that you can make the payment without ruining the financial stability of your business.

next, is to look at the loan interest and fees. This is the most of them all be sure you are very comfortable with this part and it wouldn't affect your business before indulging.

lastly is to look at the amount to be borrowed you should be sure that the money you are trying to get will be worth the stress of borrowing the money..


Add your thoughts

Thanks for helping insightful information. It's always the best to have insight before you go for a loan

 

[Deleted member 13140]

I won't advice anyone to take loans for their business well assuming they were starting out, people get deceived by this term as an entrepreneur you should take risks and that's why Most people go ahead to take loans.. its not bad if you know what you're doing but before any loan you should have had a detailed and when I said detailed i mean you have done market research and known what your customers actually want and you have tested the product by building a sales page for it and seeing what people think.

Loans aren't easy things, it could cripple you and your business for a long time.

And I love your first tip, sometimes on the road I'll see signs saying get your loan now and then their phone number those kind of thing are completely scammers or worse kidnappers, it might sound absurd but if you live in my country its not.

 

[sincerem]

I don't like loan especially from the money lenders, because malicious can simply happen and they simply make me to go torrid time when it comes to repaying back the loan which I took from them. And such can simply trigger the money lender taking my property which I brought as collateral, due to my failure to meet up with deadline. That's why I wouldn't go for any loan that requires collateral if at all I am seeking loan to operate a business. I simply prefer staying away from loan due to its dangers when I fail to meet up it's repayment date.

The best to go about loan is simply taking from the commercial banking institution or mortgages whose terms and conditions aren't deadly like the one in which the local money lenders impose. I wouldn't borrow a loan to lose more than what I borrowed or simply see interest topple due to failure to pay on time. I never love the idea of taking loan from anywhere, due to the condition it keeps me especially when I have series of issues to attend to which are money demanding as well. If one doesn't know what to do with loan in order to yield profit from it, he or she shouldn't get one.

 

[eldavis]

You made mention of checking the reputation of the loan lender, there are so many issues associated with just this aspect. There are some loan lenders who can be very aggressive and are prone to abusive words and even violence. Before taking a loan, find out from others who may have taken a loan form them before, to be sure of what you are getting yourself into.

 

[Rachael]

The thread is well detailed, comprehensive and has taken time to escalate the important points to consider. There are certain steps to be considered before taking a loan but unfortunately some customers or individual would still overlook vital points due to desperation and take loans without reading through the terms and conditions. Before taking a loan for your business, either a startup or an existing business, you should always first ascertain and rectify the means of which you would repay the loan if coincidentally things do not go as planned. In business, you should always try to avoid obtaining loans with high-yielding interest rate because the major aim of any business is to maximize profits and minimize costs. You should preferably opt for public banks where the interest rate is not too high when compared to online apps or money lenders. Also, you should have a collateral which can be equivalent to the loan collected and you should ensure not to take loans due to desperation, you should ensure that the terms and conditions are favorable most especially he duration of repayment and you should ensure that your details are highly secured and not permissible to third parties outside the financial institution.

 

[Augusta]

You are right a lot of companies or individuals become desperate when they need to either grow or expand their businesses as such they turn blind eyes to the fact that they should assess the loan they are taking. it doesn't make much sense getting a loan that comes with high interest. it's a total waste of time.

 

[Jasz]

It is normal to be scared at first , as fear is part of us, we only learn to control it so it doesn't cloud our judgement. But if you don't really know if the loan you are about take is worth it, this is totally dangerous except you mean to say , you don't know if you should acquire the loan. If you don't have tangible reasons for taking the loan or if you think what you are about to use it for is not worth it, it is better you disembark. This is very risky as you might end up misusing the loan taken and end up putting yourself and family in trouble , thereby being so pathetic and sorry for yourself. I will like you to ask yourself these questions carefully and as many times as possible. If you don't get reasonable answer after then, forget about it.
1. Do you need a loan?
2 if yes what for?
3. Is it profitable?
4.is it feasible?
5. Can you keep up
6. Do you still need a loan

 

[Augusta]

I like the questions you have given at the end of your post. these are vital questions that needs to be considered when getting a loan. one needs to be very sure they need the loan and how the interest rate is. sometimes not even getting a loan might even help a business better

 

[Augusta]

All the factors mentioned above are quite reasonable when it comes to getting a loan for one business but one thing that is certain is ,you must be very careful so as not to have problems when it comes to paying back especially when the interest rate is very high and the bank policy changes affecting what you are supposed to pay and you can't meet up .Your business will be seriously affected.Make sure what you are putting down as a collateral will not be more than what you are collecting from the financial institutions.You must be wise so that the loan will not affect your business.

You are right getting a loan comes with its own burden which means that one need to be very careful when procuring one . The collateral aspect must be greatly asses before engaging in one. it isn't just enough to agree. check that you're not shortchanging your self.