Are Bad Credit Loans Killing Your Business?
Every business has danger zones to avoid, but those things aren’t always obvious. As the excitement of running a business mellows; you may ignore the crucial factors that actually determine whether your business will prosper or not. The financial and managerial hassles and in-between phases can take a toll not only on your company’s finances, but on your reputation and determination to continue doing business as well.
Here are some of the most common business killers you need to avoid:
- Making decisions “too soon”. A negative profit margin can definitely bring you sprinting to the opposite direction. But, it shouldn’t be the case.
Before you take out a loan, make sure that you align all your solutions to your business plan. That means your loan must be something that you can pay off-in terms of attainability of the repayment amount and the ability to meet all your other payments within that period. It may also involve checking the lending company’s background and whether it will offer reasonable loans terms.
When choosing a loan product, it is important to consider how it will meet your business needs, and if such solution can help you improve your branding, customer service and human resources. When a business assumes new financial obligations, everything else in the company is affected. So, whether your business plans to assume a major change or considers a new venture, always make it a point to look in to your 3 to 5 year business plan before obtaining bad credit loans to finance it.
- Loan trap.
A few major problems surface when you obtain a wrong loan. Money issue such as running out of cash and defaulting on your payment is one of the major issues. When you handle some business related issues such as failure to gain the target traction or some problems with the viability of your business model—you still have money problems to deal with. As you struggle to meet your payments, the technical aspects of your business, customer service and other important business process will also suffer.
One common loan trap is pre-compute interest—especially if you don’t have any idea what you are getting into. So, when you apply for bad credit loans always ask how your interest is calculated. This way, you would avoid paying more interest when repay your loans early. But, pre-compute interest isn’t all that bad. It is just a matter of handling your debts. For example, your loan term is 3 years, but you wanted to pay it in full within 2 years’ time—your payment will still be based on the rate quoted when you obtained the loan. But, if instead of paying off your loan in full you use it to finance other profit generating projects—you don’t only earn interest in the process, you also avoid making early repayment fees.
Another loan trap is hefty origination fee. Although you cannot completely avoid paying origination fee make sure that you know how much it costs before you apply for the loan. You can check the APR of a loan, which contains the origination charge plus the interest rate. Otherwise, the lender may deduct the origination fee from your loan and you will end up with lesser loan proceeds. For example, if you borrow $20,000 and the origination fee is 3%, you will only receive $19,700. So, if you need a higher amount, make sure that you include the origination fee in your computation.
- Complete autonomy.
People need people—look, there’s nothing wrong with independent thinking and self-reliance. But, if you really have to make big decisions—it’s important to ask around first. For sure, there are people in business that you really trust. Why don’t you let them go over some of your ideas and see if it is the most feasible way to deal with an issue? One of the many reasons why you hire good employees is for them to help you make decisions that could have a huge impact on your business. When you make a business decision you analyze each situation—and make conclusions according to the practicality of the solutions in finance and managerial aspects.
For example, if you haven’t consulted anyone as to the feasibility of your financial strategy—you may end up missing some vital points that could ruin your plans. But, if there are employees you trust or people who you consulted for advice, you can receive substantial input that will help you come up with a better solution, than the one you thought of, alone.
A bad credit loan will not kill your business per se. It is your financial strategy that can pull it down or raise it up.
If you have questions on how to obtain the most affordable and business-oriented bad credit loans for entrepreneurs like you, make an enquiry today and we will help you throughout the loan process.