Things to consider before taking a business loan

in hive-175254 •  7 days ago 

Business ideas keep coming up here and there and we never seem to have enough of it, more than ten people living in the same geographical area seem to have a multibillion business idea, a lot of people just want to quit their jobs and start working on the business idea immediately because they have a boss that keeps frustrating them.

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In order to turn this multibillion business idea into reality, cash is required and most often the cash required is not just available, the zeal is there and family and friends are not able to support but there is an assurance that this business idea is real and it just requires fast execution. A friend then suggests that you take a business loan to get your plans come into reality, which sounds like a perfect idea right? After all, your business idea is good enough and you will pay back the loan in less than twelve months.

Is it really a good idea to take a loan for a new business idea?

No matter how well you study about business, a real field work is required to show certain skills books will never show, it is rather easy to get some cash and spend it on renting a store and filling it up with the things you feel people might like but at the end of five months, it turns out your multibillion idea is not acceptable by the market. It is fine for some of this mistakes to happen in business and it is on a fair side if the finance was from personal savings or support from friends and family but if the loan was taken from a bank or any other financial institution, I am sure you know that is not so good.

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Taking a loan for the purpose of starting a business can be compared with putting yourself at risk for a total stranger, I believe that if you have to keep saving to start the business, then it is better to take your time and save properly in order to be able to start the business.
Since failure at the beginning of every business is very common, it will be less painful if the money had come from your savings but if it had come from a loan, you will be giving up too much and it is going to be really heart breaking because apart from losing your business you also need to look for a way to pay back your loan.

What about taking a loan to increase the capacity of an existing business?

A business should be increased only when you have totally used your current capacity to the fullest. For example, you may have a coffee shop where you sell ten cups of coffee every morning but when you realize you have a daily long que of customers who want to take coffee every morning, to retain your customers you can get more coffee makers and workers on a loan because you are sure of being able to pay back the loan and your business growth does not say otherwise.

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Credits are a double-edged sword, I know that they are very good to get you out of trouble, but the truth is that you create a bigger one. You end up paying much more than what you were given, and it ends up being a headache and something almost unattainable to finish. I think the best thing is to try not to depend on them and if so be sure to cover them in time.