Loans can build or kill your business | © Fola Daniel Adelesi

In trying to raise business capital for startups, entrepreneurs often consider a business loan as a viable option. A business loan can be great and at the same time, it can become a thorn in the flesh. Just as it can be used to build a strong thriving business, it can also be used to kill a growing business.
Entrepreneurs are often advised to keep their business expectations low or conservative. This advice can’t come at a better time than when you are asking for a loan to do business. If you get your figures up and create false hope for yourself, you will look good to the creditor but will soon run into trouble with them.
Being rejected can be very sad and for that reason, so many entrepreneurs are doing as much as they can to make sure their applications for loans are not turned down. These tons of applications could be to family members or some other associates and in some cases, to the banks. The excitement coming with the ability to secure a loan is usually very high.
Many of the banks understand how things will turn out so they often advise startups not to consider taking a loan from the bank. You will be advised to talk to family and friends or other business associates and think of the bank as a last resort.
This is a caveat to you and it will do you a lot of good to bear this in mind always so long as you are considering a loan as an option in raising capital for startup or for business expansion. Don’t just jump at a loan even if you are offered one. Entrepreneurs, even though they need a lot of cash, should not take every kind of loan they see and whenever they see them. You just might end up taking a Greek gift.
Before you take a loan, if you have finally decided to take one and that is the only way out for you, you need to be clear about these things:
1. How much is the loan that you really need and not how much you think you need? – So many entrepreneurs will be able to give you figures of how much they think they will need to push their business or get it running. When you check a lot of them, they don’t need half the money they are asking for. A few others need more than they are asking for. Be sure you know what you really need and that is what you should be asking for.
2. Can your business pay back the loan? – Any business that wants to take a loan should have the cash flow that enables it to pay back the loan. If the cash flow is not there, do not take the loan. The business will get into trouble as soon as the loan is taken.
3. What is the repayment plan of the loan? – Don’t assume that you can pay back the loan on your own terms. You will be shocked to see people coming back to ask for their money almost immediately after giving you the loan. Have a clear agreement on when the loan will be paid. Clarify that you will split payments or pay back at once. If you will split payments, let the creditor know how much you will be paying back.
4. What other terms and conditions come with the loan? – Some business owners have taken loans before realizing that the loans come with some other conditions. Sometimes these conditions are in ‘small prints’ or the ‘Ts and Cs’. Please read every document you are given and be sure you understand all conditions regarding the loan instead of getting overly excited.
5. Document the agreement on the loan before taking it – It is one thing to have verbal agreements and it is another thing to have written agreement on when and how things will be done. Some people will want to shy away from this so you can do it in a very smart way. Send emails about everything and that becomes a form of document that you can always refer to. If you are chatting online about this, do a screen shot of the conversation and mail it to yourself or print. 
6. Remember it’s a business loan and not a personal loan so it must be used strictly for business.
7. Try to pay back faster than you agreed to. This will save you the embarrassment of being chased by creditors or forfeiting your assets that were used as collaterals for loans.
When to turn down a loan
1. If it lower than what you asked for. Please turn down the loan because you will not be able to achieve what you intend to achieve.
2. If it comes with some stringent conditions. Don’t focus more on the money than on the terms. There could be trouble lurking around.
3. When the creditor offers far more than you need, don’t always see this as an opportunity. Only take what you need. If they insist on giving you more, you need to run.
Remember, a loan can grow your business but your business can also be grounded by a loan.

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