HOW DANGEROUS IS COLLECTING A LOAN TO FINANCE A SMALL BUSINESS
Hello,welcome to another wonderful article we shall be discussing here and right now.
It’s a pleasure to serve you and offer better information and serve as a guide
to you if you are professional in your small business, we could always learn from
each other no matter how small or little it is but remember “no knowledge is
small” don’t mind me this is just a tip, I like flowing with my audience. Okay
let’s roll out to today’s topic and smash some key points here.
Have
you ever wondered why large business keeps growing despite some economic
challenges, I can tell you “finance”
is the bedrock of every fast moving business and more also ”good management
system” will help make the finance more resourceful and small business sort out
for the best option which is loan in
order to keep the business alive. Yea, that’s the very great importance of
collecting a loan. At its initial stage, it gives your business another level
of continuity and strength because money has been utilized and so the business
is expected to blossom but in appropriate utilizing of this resources can bring
your business down and cause you to run into debt.
you ever wondered why large business keeps growing despite some economic
challenges, I can tell you “finance”
is the bedrock of every fast moving business and more also ”good management
system” will help make the finance more resourceful and small business sort out
for the best option which is loan in
order to keep the business alive. Yea, that’s the very great importance of
collecting a loan. At its initial stage, it gives your business another level
of continuity and strength because money has been utilized and so the business
is expected to blossom but in appropriate utilizing of this resources can bring
your business down and cause you to run into debt.
Okay
let’s roll down to our subject matter but first we are going to be discussing
briefly on some keywords in order for us to arrive at a better understanding of
what the implications or dangers of collecting a loan can do to your business.
let’s roll down to our subject matter but first we are going to be discussing
briefly on some keywords in order for us to arrive at a better understanding of
what the implications or dangers of collecting a loan can do to your business.
What
is Loan? For sure we have heard about loan and what it actually means but let’s
quickly emphasize on it for better understanding to our topic of discussion.
is Loan? For sure we have heard about loan and what it actually means but let’s
quickly emphasize on it for better understanding to our topic of discussion.
Loan is the lending of money by one or more individuals, organizations or even
entities to other individuals or organizations. In loan process there is a
person called the recipient who receives the loan (the borrower) and liable to
pay interest on that debt until every amount is repaid and not only the
interest been fully paid but also the principal or initial amount borrowed. A loan
can be of different types which include:
1
A secured loan: this type of loan expects the borrower to pledge its asset as
collateral so that upon breach of contract or inability to pay the loan then
the property is confiscated.
A secured loan: this type of loan expects the borrower to pledge its asset as
collateral so that upon breach of contract or inability to pay the loan then
the property is confiscated.
2
A mortgage loan: this type of loan is very common. Most individual opt-in order
to purchase property (ies). The lender is usually a financial institution is given
security-a lien on the title of the property until the mortgage is paid up in
full and if the borrower defaults in paying the loan, the bank would have the
legal right to reposes the house and sell it to recover sums owing t it.
A mortgage loan: this type of loan is very common. Most individual opt-in order
to purchase property (ies). The lender is usually a financial institution is given
security-a lien on the title of the property until the mortgage is paid up in
full and if the borrower defaults in paying the loan, the bank would have the
legal right to reposes the house and sell it to recover sums owing t it.
3
Demand Loans: this are short term loans that typically do not have fixed dates
for repayment but rather this type of loan carries a floating interest rate
which varies according to the prime lending rate or other defined contract
terms.
Demand Loans: this are short term loans that typically do not have fixed dates
for repayment but rather this type of loan carries a floating interest rate
which varies according to the prime lending rate or other defined contract
terms.
4
Unsecured loans: these are monetary loans that are not necessarily secures
against the borrower assets. They may be available to individuals under many different
packages like the personal loans, credit card debt, bank overdraft, corporate
bonds, peer-to-peer lending or credit facilities and the interest applicable
vary depending on the lender and the borrower.
Unsecured loans: these are monetary loans that are not necessarily secures
against the borrower assets. They may be available to individuals under many different
packages like the personal loans, credit card debt, bank overdraft, corporate
bonds, peer-to-peer lending or credit facilities and the interest applicable
vary depending on the lender and the borrower.
FINANCE
TO YOUR BUSINESS
TO YOUR BUSINESS
Like
we have rightly said, a business without finance is likely to fail, what then
is finance?
we have rightly said, a business without finance is likely to fail, what then
is finance?
Finance
can be defined as that art of money management that is concerned with
investing, borrowing and lending, savings, and forecasting.
can be defined as that art of money management that is concerned with
investing, borrowing and lending, savings, and forecasting.
Finance as it relates to business means the process of creating funds in order to run your small business or corporations for effective growth and development thereby yielding
profit. Most businessmen and organizations source out different ways to get
finance for the business which are highly beneficial and others which can
actually kill your business. We shall be looking into some of the sources of
finance to your business or organization and they are:
Long
Term Sources
Term Sources
Medium
Term Sources
Term Sources
Short
Term Sources
Term Sources
In
a simpler term, we can say the sources of finance for your business or
organization/company included:
a simpler term, we can say the sources of finance for your business or
organization/company included:
1
Personal savings: when starting up a business or in organization, your first
investor is you and this could be from savings
Personal savings: when starting up a business or in organization, your first
investor is you and this could be from savings
2
Love Money: this is money you collect from your family, friends, parents or
sponsor either as a loan or gift to help boost your business
Love Money: this is money you collect from your family, friends, parents or
sponsor either as a loan or gift to help boost your business
3
Investors: These are people who are interested with your idea in generating
your new business or existing one. These people(investors) love what you do and
are willing to offer contribution/investment in the business with a share of
profit at the short or long run.
Investors: These are people who are interested with your idea in generating
your new business or existing one. These people(investors) love what you do and
are willing to offer contribution/investment in the business with a share of
profit at the short or long run.
4
Angels: these are generally wealthy men or retired company who seek for small
firms owned by others in order to invest in. they contribute their ideas,
expenses and familiarity within the business because they are expert in their
field
Angels: these are generally wealthy men or retired company who seek for small
firms owned by others in order to invest in. they contribute their ideas,
expenses and familiarity within the business because they are expert in their
field
5
Government grants and subsidies: government grants provide financing such as
grants and subsidies that may be available to your small business
Government grants and subsidies: government grants provide financing such as
grants and subsidies that may be available to your small business
6
Bank Loans: these are most commonly used source of finance for small and medium
sized business and most small business run into debt through this medium, bank
loans are offered to business mostly with collateral and so they look for
business or individuals with good sound track record.
Bank Loans: these are most commonly used source of finance for small and medium
sized business and most small business run into debt through this medium, bank
loans are offered to business mostly with collateral and so they look for
business or individuals with good sound track record.
It is good to shop around
and look for a bank that surely meets your needs without having to s much be in
stress in order to afford your needs.
Now
here comes our topic “how dangerous is collecting a loan to finance a business”
or “the implications of collecting a loan for your business and we shall be
taking number 6 (bank loan) source of finance as a case study.
here comes our topic “how dangerous is collecting a loan to finance a business”
or “the implications of collecting a loan for your business and we shall be
taking number 6 (bank loan) source of finance as a case study.
Having
discussed briefly about loan types, finance and sources now what are the
dangers and implications of taking up for your business but don’t quote me
wrong, there are excellent advantages of taking up a loan.
discussed briefly about loan types, finance and sources now what are the
dangers and implications of taking up for your business but don’t quote me
wrong, there are excellent advantages of taking up a loan.
Dangers
or implications of collecting a loan for your business
or implications of collecting a loan for your business
1
you could actually be paying interest on funds you are not ready to use or not
using it to generate income, you find it hard to pay the loan with the interest
and this will put pressure on you on how to pay back this loan thereby
affecting you emotionally
you could actually be paying interest on funds you are not ready to use or not
using it to generate income, you find it hard to pay the loan with the interest
and this will put pressure on you on how to pay back this loan thereby
affecting you emotionally
2
where your customers owe you or do not pay in time in the case of monthly loan
repayment you could be having troubles with cash flow.
where your customers owe you or do not pay in time in the case of monthly loan
repayment you could be having troubles with cash flow.
3
You can be putting your home, car, property at risk. Definitely upon taking a
loan, the financial institution will request for collateral where you fail to
repay the loan with its interest at a fixed deadline, you may lose your
property.
You can be putting your home, car, property at risk. Definitely upon taking a
loan, the financial institution will request for collateral where you fail to
repay the loan with its interest at a fixed deadline, you may lose your
property.
4
It is not advisable and dangerous as well to take up a loan when you have ongoing
expenses as because it may lead to difficulty in proper loan utilization and
repayment and you may end up not satisfying your small business or the financial
institution of which the loan was collected
It is not advisable and dangerous as well to take up a loan when you have ongoing
expenses as because it may lead to difficulty in proper loan utilization and
repayment and you may end up not satisfying your small business or the financial
institution of which the loan was collected
5
You shouldn’t collect more than you need, yea you heard me right, if you just
need a small amount of money to figure out one or two little needs then
collecting a loan will not be the best option because the higher your loan
without proper planning and utilization
the higher the risk of running into debt
You shouldn’t collect more than you need, yea you heard me right, if you just
need a small amount of money to figure out one or two little needs then
collecting a loan will not be the best option because the higher your loan
without proper planning and utilization
the higher the risk of running into debt
6
The dangers of collecting a loan is paying an upfront fees to borrow money
because that can actually led to bad debt
The dangers of collecting a loan is paying an upfront fees to borrow money
because that can actually led to bad debt
7
You might get punished for paying off your debt early and when it’s not yet
time but swift payment keeps your mind at rest so learn to know their terms and
conditions (financial institution)
You might get punished for paying off your debt early and when it’s not yet
time but swift payment keeps your mind at rest so learn to know their terms and
conditions (financial institution)
8
Signing up for a variable rate when you shouldn’t have can be a big problem to
you, so you should strategically look into the rate attached in paying the
interest so that you necessarily don’t fall into what will be hard for you to
repay
Signing up for a variable rate when you shouldn’t have can be a big problem to
you, so you should strategically look into the rate attached in paying the
interest so that you necessarily don’t fall into what will be hard for you to
repay
9
Confusing a payday loan for a personal loan
Confusing a payday loan for a personal loan
10
you should be able to determine how effective you could be in the loan
repayment duration which could be monthly quarterly, or yearly and find the
right duration that will be favorable to you
you should be able to determine how effective you could be in the loan
repayment duration which could be monthly quarterly, or yearly and find the
right duration that will be favorable to you
To
really emphasize on this article, am not necessarily saying there is no benefit
of collecting a loan, like I have said earlier there are also advantages but
critically looking at the points mentioned you should know that this article is
about the dangers of collecting a loan if no proper planning and utilization of
this loan to serve as a great source of revenue to you and your small business to
grow it will surely bounce back at you
really emphasize on this article, am not necessarily saying there is no benefit
of collecting a loan, like I have said earlier there are also advantages but
critically looking at the points mentioned you should know that this article is
about the dangers of collecting a loan if no proper planning and utilization of
this loan to serve as a great source of revenue to you and your small business to
grow it will surely bounce back at you
So
what do you have to say, drop your comments below or subscribe o our newsletter
or better send us a message to seek better understanding and questions and we
will respond to you shortly
what do you have to say, drop your comments below or subscribe o our newsletter
or better send us a message to seek better understanding and questions and we
will respond to you shortly
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