Why you should'nt take a loan in funding a business

[Ayuba Ernest]

When you are starting a business, there are a lot of things to think about. One of the biggest decisions you will have to make is how to fund it. There are a lot of different options available, and one of them is taking out a loan. This article will discuss some of the reasons why you should not take out a loan in order to fund your business.

There are a few reasons why you might want to avoid taking out a loan to fund your business.

The most obvious reason is that you’ll be taking on debt. This means you’ll have to make monthly payments, and if your business fails, you could find yourself in a lot of trouble.

Another reason to avoid loans is the interest rates. They can be quite high, which means you’ll be paying back a lot more than you borrowed.

Finally, if your business is just starting out, it might not be able to afford the monthly payments of money issued by your lender. Your business might not be as successful as you have planed putting it at a higher risk of collapsing.

Overal, taking loan is not a good idea for business startups and owners and should be avoided.

 

[Augusta]

This is same for me I have always been an advocate of no loan especially for a start up. Starting a business might just seems a good alternative to other means of getting money for business. but it in reality it isn't the best

Starting a business with loan means that you might just be starting a business that the foundation is shaky. This is because you are going to pay the loan with high interest which means money will be leaving the business intermittently and this kind of pattern isn't good for a new business. if you are not careful such business will collapse before you even begin it

Again starting a business with a loan means that you are already a debtor which might have a high level of negative effect on the business. A business with high debt means that there is no headway for it as it is. You would need to pay up your debt and start making profit in order to set the business on the road of success without that it will just failed.

The truth is that a business started on loan is likely to fsil if one doesn't have a mentor that can direct one appropriately.

 

[Holicent]

It is important to know the difference between debt and equity financing before deciding how to fund your business. While debt financing involves taking loans from financial institutions, capitalist investors or even family members and friends, it is not recommended for startups in their early stages of business.
On the other hand, equity financing entails selling of stakes in your company with an aim of raising capital for your business. For example, when a company issues stocks to the public, it is said to be raising capital through equity financing.

Entrepreneurs in their early stages of business should be cautious while applying for debt financing as they may run into trouble if they cannot pay back on time. Lack of adequate cash flow is one of the biggest reasons why small businesses fail. Asking a loan from financial institutions should be your last resort when looking to raise capital for your business. The best way to avoid taking a loan is simply by creating a budget and living within those parameters. The idea here is to spend less than what you earn. Dealing with debts in the early stages of running a business can be stressful since it does not leave you with any money for emergency situations such as repairing broken machinery or replacing employees who have resigned from work.

 

[Kingsley]

You are right, starting a business with loans is very risky mostly if the entrepreneur is still very new to the business. This is because the individual will certainly lack the experience and the foresight as to how to run the business and how to handle challenges that the business will certainly face at the beginning of the business.. So I always encourage people who do not have money to start a business to go and partner with others who do not have much ideas but have the funds. Or on the other hand get people who are much more experienced and try to get more practical experience. So this will help us more to manage the business so well when we are left to run it on our own even if we eventually access loans.


On the hand it is advisable to get a job to work for sometime and get enough resource to start the business we intend to start. This will save us all the stress that loan would cause us and the new business.

But this those not mean that loans are outrightly bad as accessing loans most times helps us to be up and doing and keep us on our feet.

 

[funmi]

Funding a business with loan money is actually bad and very risky. This is a decision I have always discourage in many of my post on this forum. It is unwise to take a loan to start up a business.
Loan should be taken when you are very sure and certain that you have a way of paying back. Due to the amount of money that is being charged by banks, it makes it hard for business owners to pay back in time. When there is shake ups in business or when the economy is not really working it usually affect businesses which can make business owners to be incapacitated to pay back there their loan.
It is is still good to take a loan for an existing business but not a business that is just starting. A new business should be financed with your own capital but not with borrowed money.

 

[Suba]

At start up your business, it will be safer if all the capital is your own, whether it is investment capital or working capital.
For a start-up business, if all of the capital (100%) is financed with debt, the entrepreneur will have difficulty determining the risk of uncertainty in the future, sources of debt repayment, etc., the ability of the business to earn a profit. Besides not being recommended by loan finance experts for start-up businesses, this loan will of course be rejected by the bank or other financial institution.

 

[Palaeophile]

True! I don’t like taking loans for starting a business because there are chances that your business might not flourish and you’ll just be in debt.

 

[Prayzident]

It depends on the type of business you want to go into before funding it,if it is a business with little profit i don't think there is a reason why you should fund your business but if it is the one with larger profit i guess is good to collect loan and boost your business. For example,a person that sells provision stuffs can decide to collect loan and boost the business.

 

[Shrubbery]

I would rather advise you to try to get investors to invest in your startup than to take loans. Especially if you haven’t built your foundation yet and the business is in the making.

 

[Ithedicious]

Getting a loan to start up something comes with so many challenges , a lot of business owners must understand this because is not just easy for you to get a loan to start up business and you just expect the business to succeed perfectly like that. No the chance of succeeding might be very slim if proper care is not taken and in most cases a lot of people are just interested to start of this business because they were motivated by people .

In as much as motivation is absolutely necessary and will help people in business but it is very important for us to be careful and know what we are doing.

Sometimes when the Risk of our action is much more than it's possible profit potential then we have to reconsider our decision because the most important thing we should try to avoid in this life is taking a decision that might lead us into trouble.

 

[Oluwasegun purpose]

I will not advise you to take a loan to start any kind of business. Why is that that loan in which you take to start the business is called what,is called your capital .

First what is a capital. A capital is the money in which we used in starting up a business. Some people who want to involve there self in taking loan tostart sa business am telling you the truth that business will not be going well most time it will not bring any profit for you instead of bringing profit it will bring loss.

So, if planning to start up a business why no let your capital come from your own hands so you can be able to make a good and profitable business in which you will also be Happ ,even talking a loan now is not an easy task in this period of time before anyone can issue you a loan you must have many things , in which you must have a guarantor to stand for you , even in most places they will tell you to be paying interest.that internet in which you will be paying it can also help you in funding something in your business ..

Taking loan to fund or start a business is not a good idea....

 

[Yusra3]

Even though making a loan to cover your business can be quite risky concept therefore you should approach it with more than careful consideration. The debt service repayment is independent of the money which come in, hence, the new business is severely cash-flow obliged. Too high interest rates can curtail profitability. Artificial Intelligence is revolutionizing the world of business and finance at an astonishing pace. From smart financial advisors and automated cashierless check-outs to predictive analytics and data-driven decision-making, AI is empowering financial institutions and businesses to become more efficient, informed, and customer-centric. This transformation has also significantly impacted the finance industry in three crucial areas But, the situation in the case when the borrower doesn’t have enough collateral or demonstrated revenue stream, the loan conditions (high interest rate or more collateral that you need to obtain the favorable ones) become really challenging to get. Entrepreneurs must make community investors, grants, and self-reach their highest priority before reaching out for a debt that will probably ruin the company's prospects if the growth pattern is not matching with the expectations and portfolios.