Many entrepreneurs take out business loans when they start their own company. After all, not everyone has the finances they need to get up and running. If you are going to be taking out a business loan, do with a great amount of care and caution. Here are common mistakes to avoid when doing so!
Not Working Out How Much You Need
This is one of the main errors that people make when it comes to taking out a business loan. Rather than sitting down and working out how much they actually need, they just take out whatever they can get their hands on.
This often results in people taking out more money than needed, which means they have more money to pay back in terms of principal and interest. It is important to be specific with a budget, and have a plan to pay it back.
Not Considering All Options
There are a lot of different options when it comes to taking out a loan. You can go for a secured loan or an unsecured loan, for instance. You should also look at SBA loan benefits and their eligibility too. Don’t simply dive in and go for the first loan you find. Here are some other options.
Leasing Your Land
One of the most valuable commodities you have as a business owner is your land. One of the most profitable ways to make money from your land is by leasing to cell phone companies. Because of the increased demand for cell phone reception the big companies are coming to all sorts of landowners with offers.
Before you take the first offer it’s worth meeting with a firm that deals with these issues. A company like Vertical Consultants can help you to get the most amount of money for your land. But we have to remember that with leasing land comes a cell phone tower. Is this something that you can live with?
From a business perspective, it will certainly improve your communication efforts. And if you’ve opted for a rural location this could be a boon for your business in a communicative aspect as well as a financial one.
Have you got problems with people refusing to pay up? One of the most infuriating components of any business is waiting for someone to cough up the cash. Factoring is a method where companies sell their receivables to a third party to get money upfront.
The great thing from any business’s perspective is that once they sell their invoices to this third-party company, they do the chasing. This means that you’ve got the money you need to pay off any pressing bills while the invoice factoring company chases the nonpayer.
Be careful with crowdfunding because it’s not a way to raise a huge amount of cash. It can certainly help if you’ve got a short-term project that you’re trying to get off the ground. And you are relying heavily on your friends. It’s a far better method for those people trying to facilitate a one-off project. This is why it’s so popular with musicians or filmmakers.
Find An Angel Investor
This might be the preferred option. An angel investor can be a godsend. But the key to attracting an angel investor is about the pitch. You’ve got to make sure that everything is covered in your pitch. And we have to remember that angel investors have far more experience than we do.
This means that if they are to invest in our business we’ve got to show so that we’ve tried, possibly for many years. You also need to make sure that you know your stuff and have competitive analyses and financial forecasts in place.
There are ways for a quick cash injection, especially if you’ve been around the block a few times. Don’t forget that you can acquire a business loan. But the most important thing to remember with all of these approaches is that you don’t compromise your business. When we need money we can bend over backward. Remember, it’s all for the benefit of your company, not necessarily acquiring extra money.
Not Making Sure You Can Afford the Repayments
This is one of the most damaging errors you can make when it comes to any sort of loan. If you cannot afford to make the repayments, you could find yourself in a position where you default.
This is something that will show on your credit report for seven years, and it will have a significantly negative impact on your rating. Make sure you can afford the repayments. If you cannot, look for a different loan with different terms.
Not Reading the Terms and Conditions of the Loan
It is vital that you take the time to read the terms and conditions of the loan so you know exactly what you are getting yourself into. If some of the terms are not clear, get them clarified. A lot of people end up signing up for loans and they do not realize that there are fees if they want to make extra payments or pay their loan back early, for example.
This is why it is vital that you take the time to read all of the black and white pages, no matter how long-winded this may seem. You may regret it if you don’t.
As you can see, there are a number of different mistakes that are associated with taking out a business loan. However, if you can avoid the errors that have been discussed you will give yourself a great chance of making sure that you end up with the best business loan for you.