6 Loan Mistakes Every Business Owner Must Avoid

Published on: 15 November 2018 Last Updated on: 24 July 2024

If you’re a business owner, it’s highly likely to come across situations where you’ll need a business loan. In such events, a business loan can fulfill the fiscal deficit to help keep the business on track. The only catch is taking a business loan can sometimes be a complicated process, and owners might end up making uninformed decisions. We’ve listed below some common loan mistakes that every business owner must avoid while taking a business loan.

Here are 6 Loan Mistakes Every Business Owner Must Avoid:

1. Waiting Until Last Minute:

Business loans are not only for covering up last-minute emergency expenses. The best use-cases of a business loan can range anywhere from hiring new people to investing in new technology. Waiting till the last minute, when the business cannot go without an immediate availability of cash is a recipe for disaster. It’s always a good idea to prepare for the future, more so, in the case of a business. Last-minute decisions are often hasty and a result of poor judgment where business owners are likely to take any loan deal that comes their way. It can backfire and incur more losses in the future.

2. Borrowing More Than You Can Afford:

Just because you are eligible for a huge business loan doesn’t mean you should take one. Before even applying for a business loan, you should evaluate your business’s present financial situation. If you end up borrowing more than you need, paying it back can get difficult. Furthermore, not spending everything will lead to ‘dead cash’ in your bank account. So, do your math, check your statements, and only apply for an amount that your business actually needs.

3. Not Knowing About Collateral-Free (Unsecured) Business Loans:

Most banks will insist on having sufficient collateral before they approve any loan. Banks that require collateral will only provide secured loans. However, some banks and lenders offer business loans without any collateral. This type of loan is known as an unsecured loan where the business owner doesn’t have to pledge any business or personal assets to the bank. Unsecured business loans with bad credit are the best option for you if your credit score didn’t reach the standard requirement of most lenders.

4. Not Keeping a Good Personal Credit Score:

Different financial institutions will have different criteria for giving out business loans. However, most of them will definitely consider the credit score of the owner while processing any business loan application. A good credit score shows that you’re a good steward for your money. It also helps in negotiating better rates. Hence, maintaining a good personal credit score becomes critical for business owners.

5. Not Solving Current Cash Flow Problems:

As a business owner, your entity may require money for different needs. However, if you’re looking to get a loan to fix irregular cash flow in your business, it might not be the wisest thing to do. Analyze why your company has irregular cash flow and don’t be a statistic of the sunk cost fallacy. Sure, you can have a temporary fix, but once the loan money is utilized, a business can again go back to the same. In such a situation, it’s important to make sure that finances are under control after utilizing loan money.

6. Not Knowing the Agreement:

Signing an agreement without reading the finer details will put you as a business owner in an undesirable situation. Sometimes the financial institution giving out a business loan can put a little remark in the agreement that will require the borrower to pay additional fees. More than that, the agreement can even have a clause of variable interest rate. Hence, it becomes essential to read the documents carefully before signing. At any point, if you’re uncomfortable with the offer, talk with the lender to negotiate a better deal.

Conclusion:

It’s not unusual to hit occasional financial hurdles when running a business. To help overcome these situations – business loans from financial institutions can help owners get over financial difficulties. Gone are the days of lengthy processes or huge collaterals to take a business loan, so don’t be nervous if your business is losing some steam over money. Today, the online mode for business loan applications has made the entire process seamless, and financial institutions like ABFL Direct offer loans with no security whatsoever. There are minimum paperwork and a flexible tenure for business to pay it back.

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9 Vital Options for When You’re Desperate for Money

Most people themselves in a financial jam from time to time, but not everyone knows what to do when it happens! The initial reaction is a sense of panic or desperation. But at some point, logic steps in and reminds those who are short on cash to take action and turn things around. If you're in need of money fast and you're not sure what action is best, don't worry. Take a deep breath and keep reading. Here are nine things you can do if you're desperate for money. 1. Pawn Something You Own: Maybe you don't have too much money in your bank account right now, but chances are you have plenty of things you can sell for quick cash. The real issue comes down to what you're willing to part ways with and how much you can get for the things you pawn. Take a moment to consider all the electronics you don't use anymore and the jewelry you never wear. See if there are any pieces of furniture around your home that are in good condition but that you wouldn't mind not having. It's not like you have to turn in every single thing of value you own. A few personal sacrifices can go a long way, though. 2. Go Through Your Closet: Instead of pawning one or two things of value, consider getting rid of a lot of things of average value--like a bag of old clothes. There are tons of consignment shops and thrift stores that are willing to purchase the old clothes you rarely ever wear. The thing is, your clothes have to be in good condition, and you shouldn't expect to get the same amount money back as what you paid. Still, one bag of clothes can become the money you need to do groceries for the week or get enough gas to get to work. 3. Do Odd Jobs: Another option you have to make quick money when you're short on cash is to do odd jobs. This can be especially profitable if you just got laid off. As weird as it may sound, just take a second to think about all the odd jobs you can do in one day. You could run errands for people who are too busy to do them themselves--like walk their dogs or pick up their dry cleaning. You could babysit, mow peoples' yards, or even take out their trash. There are plenty of things that people will pay others to do if it means not having to worry about it themselves! The trick is to get out of your comfort zone and swallow your pride a bit if you want these odd jobs to help you pay your bills. 4. Pick Up a Side Job: You could do a lot of random odd jobs or you could pick up one side job in addition to the work you already do. This will take up all of your time. It will make you tired and a bit restless, but it will also help make ends meet. It's worth it, and, it could be more fun than you think! A side job could be anything from bartending at night to being a coffee shop barista in the mornings. It could mean you become a waitress or waiter or that you wash dishes in the back of a restaurant, too. 5. Sell Unused Gift Cards: Here's an interesting thought: you may have more money available to you than you think. It just may not be in the form you need it. If you have a bunch of gift cards to clothing stores and online shops, sell them. This can give you the cash in hand you need for more important things like groceries, rent, and gas. It's a simple, stress-free way to make money in a short amount of time. 6. Get a Cash Advance: Getting a cash advance isn't the best idea on this list if your credit is already really bad. But, it could help you if you're in a financial jam for the first time and you have a plan to get out of it. Cash advances give you access to money from your credit card. Instead of using your credit card to pay for things, a cash advance gives you cash to do whatever you need to do. Keep in mind the interest on this charge may be higher than your card's regular level of interest. Most cash advances also apply an added fee to the transactions. If you're looking for a better alternative, try searching for payday loans online no credit check instant approval. These will work similar to a cash advance in the sense that you'll get the money you need in a short amount of time, but, you won't have to worry about charging even more to an already steep credit card statement. 7. Try Peer to Peer Lending: Still looking for options? Consider peer to peer lending! This is a solution most people don't even know about when they're desperate for cash. It works kind of like a personal loan from a bank, but it's more flexible. To get funds from peer to peer lending, you have to find a group lending platform and apply as a borrower. Then, a lender will decide whether or not to give you their own money for a set interest rate. You then create an agreement with this lender for the amount you're going to borrow and how you're going to pay it back. 8. Borrow Money From a Friend or Family Member: If you're considering peer to peer lending, you may as well borrow money from a friend or family member. There's no shame in doing this from time to time. Your loved ones want to see you succeed, and they're usually willing to help you get out of a jam. It's not a gesture to abuse, though. You shouldn't assume that borrowing from loved ones is a safety net that will always be there. But, it is one you can rely on when something unexpected comes up that you have to figure out how to pay for. 9. Take Advantage of All the Free Services You Can: Sometimes, the best way to make money is to save more of it. If you find yourself feeling desperate for more money, be careful about how you spend the money you do have. Take advantage of every free service you can--from food stamps to public transportation to doing laundry at your parent's house. These may change your way of life for a bit and require extra planning during your day to day routine. But, it can do wonders for your personal finances. How to Never Feel Desperate for Money Again: It's one thing to figure out how to make money fast when you're desperate for money, and another to establish such a good relationship with money that you never find yourself in such a place again. This is 100% possible if you put your mind to it. You don't have to be filthy rich to be financially secure. You just have to figure out better ways to make, save, and spend your money. You can turn a little bit into a lot if you know how to best make use of it. It takes time and effort. You'll have to change a lot of your spending habits and overcome a few fears about money, too. But, you'll come out the other end in a much better place. Here are some tools to help you figure out how to become financially secure. Read Also: Hotel Jobs In NYC – Top Reasons To Explore This Opportunity How To Save More Money?

How Do Construction Loans Work?

It can be difficult to find your dream home, even when the downturn in house prices is the largest on record. If you’re considering finance for your home build then you need to understand how construction loans work. The simple reason is that houses are still incredibly expensive, and, even if you have the funds to buy, you’re getting someone else’s idea of a dream home. It doesn’t matter how much you spend, you’re going to need to modify it to suit your own tastes. That’s why so many people are building their own homes. It’s actually cheaper than buying and you get to design the layout yourself. Of course, you still need enough funds to complete the build, that’s where a corporate finance specialist comes in handy! The Lending Criteria for construction loans: The first thing to understand is that the loan company does not have a physical asset to secure the loan against. This makes this type of lending riskier. As such, the criteria tend to be tighter, you’ll need a good credit history, and the percentage they will lend you is going to be less than with a pre-built home. It’s likely that they will expect you to put 20-30% of the funds upfront yourself. This shows your commitment and reduces your risk. The Lending Stages: Once you’ve agreed on the number of funds that you’ll need the loan company will not just give them o you. Instead, there are released in three distinct phases: 1. Foundation: The first step is to purchase the land, clear it and build the foundations. Along the way, you’ll need to get planning permission and the designs approved. This is the stage where little appears to happen but it creates the base for everything else. Once the finance company is happy this is completed they’ll release the second installment: 2. Construction: The main construction phase involves getting the walls and roof up. In short, your building project will start to look like a home. This will be a frame. You’ll need to verify with the lending company exactly what is included in this stage, they may want to see doors, windows, and internal wall ups. 3. Finishing: Finally, the third stage of funds will be released and this will cover the most labor-intensive stage, where the electrics are fitted, plumbing completed, and the interior finishing is done. This doesn’t mean your home is ready to move in, this will depend on the contract you’ve agreed with the builders. It’s possible you’ll still have to finish the decorating. Construction loans can be used if you’re undertaking the building work yourself, or if you’re using a company. But, you’ll need to have each stage checked and signed off before the next lot of funds are released, it reduces the risk to the lender. Once the house is completed the lender will expect the loan to be repaid very quickly. At this stage, you can obtain a standard mortgage for your home. Read Also: 5 Tips For Buying A Second Household How Industry-Specific Loans Can Support Your Business 7 Expert Tips In Finding The Best Mortgage Broker In Vancouver

Why Bitcoin Still Suffers From An Identity Crisis In 2020?

Depending on who you are or what you do, different ideas come to mind when you hear Bitcoin. If you are from a technology background, you will know what Bitcoin is but have still yet to use it as an asset. However, if you are not from a technological background and have heard the name, the possibility is that you have heard about Bitcoin in rumors. Rumor-based news is always related to the black market, and people who emphasize the rumor have always considered Bitcoin an underworld currency. The rise of the early stage Bitcoin startups is evident that the Bitcoin industry is flourishing. Bitcoin-focused companies such as Coinbase have already raised more than $100 million in multiple funding rounds. Despite those who still question the long-term existence of Bitcoin, it has survived its first decade with flying colors. So, if you want to become a part of this revolutionized financial era, try making your first investment with the help of the bitcoin circuit. Bitcoin: Asset Or Currency Bitcoin was introduced in the market as a digital currency. It is supported by Blockchain technology. The sole purpose of launching a digital currency was to bypass the prying eyes of third parties. With the traditional financial transaction, there is always a bank in between that validates the transaction. But with the Bitcoin transaction, the intermediaries can simply omit out. Bitcoin As A Currency Bitcoin can be used to buy a whole lot of things. You can use Bitcoin to pay your utility bills, restaurant bills, buy cars, property and book holidays. Looking at the regulation policy of the nation, you might be able to exchange Bitcoin for a lot of things. Bitcoin was launched as a currency, but it needs to have low volatility for anything to be considered a currency. In that light, Bitcoin might not be able to earn a status of a currency. Bitcoin As An Asset What happens if we use Bitcoin as an asset? According to Bitcoin enthusiasts, it can be used as a hedge against inflation. Bitcoin is considered Digital Gold because of its limited number in the market. Furthermore, experts believe that Bitcoin can be used for nations that lack adequate banking services. At present more than 2.5 billion adults do not use banking services or any other micro-financial services. Part of which is the profitability of the interest factor versus the cost to reach a bank. Why Does Bitcoin’s, Identity Matter? Today, Bitcoin has become one of the most used digital currencies to make international transactions. As Bitcoin usage has increased globally, lawmakers have started formulating policies to regulate Bitcoin. However, lawmakers are facing problems in coming up with exact regulation policies for Bitcoin. This is because Bitcoin is still confused between currency and asset. According to some experts, Bitcoin is more like an asset and even compared to GOLD. While other experts believe that Bitcoin is the breakthrough the financial system has been looking for. This means that it is upto the Cryptocurrency industry to define the actual nature of Bitcoin. Can Bitcoin Recover From The Identity Crisis? Yes, Bitcoin still has a chance to come out of the identity crisis. This is because, as of today, there are still billions of people who are not aware of Cryptocurrency's existence. Those who are familiar with it are divided into several small fragments. Hence, if the right effort is made to define Bitcoin clearly, Bitcoin still has a chance to regain its identity. The majority of the responsibility lies on the shoulders of the technologically educated generation who will carry the concept of Cryptocurrency and Bitcoin into the future. Bitcoin? It Depends On Who You Ask! As we have already talked about Bitcoin as an Asset/Currency, Bitcoin is bent more towards the asset class. The reason: not only because of its investment potential, but also its limited numbers in the market. The characteristics of Bitcoin are more closely related to that GOLD than currencies. Read Also: Defending Your Modern Company Through the Use of Threat Intelligence 5 Common Body Corporate Issues Faced by Strata Management 5 Simple Steps to a Winning Brand Strategy

6 Loan Mistakes Every Business Owner Must Avoid

Here are 6 Loan Mistakes Every Business Owner Must Avoid:

1. Waiting Until Last Minute:

2. Borrowing More Than You Can Afford:

3. Not Knowing About Collateral-Free (Unsecured) Business Loans:

4. Not Keeping a Good Personal Credit Score:

5. Not Solving Current Cash Flow Problems:

6. Not Knowing the Agreement:

Conclusion:

Is Equity Release Worth It?

How to Protect Your Finances While in a Nursing Home

Content Rally

Content Rally wrapped around an online publication where you can publish your own intellectuals. It is a publishing platform designed to make great stories by content creators. This is your era, your place to be online. So come forward share your views, thoughts and ideas via Content Rally.

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Related

9 Vital Options for When You’re Desperate for Money

How Do Construction Loans Work?

Why Bitcoin Still Suffers From An Identity Crisis In 2020?

6 Loan Mistakes Every Business Owner Must Avoid

Here are 6 Loan Mistakes Every Business Owner Must Avoid:

1. Waiting Until Last Minute:

2. Borrowing More Than You Can Afford:

3. Not Knowing About Collateral-Free (Unsecured) Business Loans:

4. Not Keeping a Good Personal Credit Score:

5. Not Solving Current Cash Flow Problems:

6. Not Knowing the Agreement:

Conclusion:

Share this Article

Is Equity Release Worth It?

How to Protect Your Finances While in a Nursing Home

Content Rally wrapped around an online publication where you can publish your own intellectuals. It is a publishing platform designed to make great stories by content creators. This is your era, your place to be online. So come forward share your views, thoughts and ideas via Content Rally.

Leave a Reply

Popular

Follow Us

Recent

Related