Do's and don'ts of taking out a loan

The Covid-19 pandemic presents unprecedented challenges to the world’s healthcare and economic systems, and to us, as individuals. It is during difficult times like these that it is more important than ever for everybody to stay calm, think clearly and act responsibly. Panic can lead to rash decisions that are later regretted. It is far wiser to remain focused on the long-term picture.

Dos and donts business loan main

If you are considering a business loan, here are some Do’s and Don’ts to assist you in your decision.

It is difficult to get a loan if you don’t follow the procedures or don’t have the necessary documents. First rule is to not assume that you will get a business loan so explore your options. Make sure that you actually really need financial assistance before applying for a loan as you don’t want to end up in debt and without a business.

It is important to estimate exactly how much you will need to get you started. Do your research and have your business plan ready. You need to be able to go to the lender with a justifiable amount.

Here are some basic do's and don’ts of taking out a business loan to help you prepare:

 

1. Do determine if your business is feasible

You have to convince the lender that your business is worth the investment even if it’s the bank that you approach for assistance. The longevity and sustainability of the business needs to be clear and your business should have some originality so you can justify what sets your business apart from others in the same market.

This is why it is important to have a detailed business plan that shows that you have done your research. A clear indication of growth in the business is a must meaning that you should be able to anticipate changes in the economy and trends, therefore, a financial forecast will be crucial in the business plan.

 

2. Do build and maintain a positive credit record

Banks often look at your personal ability to pay back your debt and whether your accounts are in good standing e.g. payments made on time. It is best to have debt in the form of opening an account to improve your credit score so you don’t appear as a lending risk to lenders. However, don’t max out your credit cards every month.

 

3. Do have assets and surety

You need to know which assets you are willing to use as collateral so that the lender can have surety that in the case of not being able to pay back the loan they can use your asset as security for the repayment of your loan. With that said, having tangible assets helps to secure your finances as well as a trustworthy surety. However, you have a responsibility of knowing how much your collateral items are worth.

 

4. Do have a lawyer

This means that you should check with an attorney before signing any legal documents such as a loan agreement. They can also help unpack the legal obligations of your contract with the lender before binding yourself to the agreement.

 

5. When not to get a loan

Don't get a loan if:

  • You don’t really need one.
  • You can’t make ends meet personally.
  • Your taxes are not up-to-date, as a business owner you will have to be knowledgeable about tax implications. If you can’t comply with taxes then there is no guarantee that you would comply with your loan agreement, therefore, submit your tax timeously.

 

6. Don't hide useful information

Disclose any vital information upfront because transparency is very important therefore keep every piece of documents that the lender could possibly ask for. It also works to your advantage if you honest.

 

7. Don't underestimate your expenses

You need to find out exactly how much you will need and be able to justify how you got to that amount.

 

8. Dress appropriately

Looking responsible and organised is key when meeting with your potential lender. First impression really do count so make it a memorable one therefore dress and act professionally.

Make sure that you actually really need financial assistance before applying for a loan as you don’t want to end up in debt and without a business.

It is important to get financial coach that will guide you in making the right financial decisions for you and your business

Click here to speak to an accredited financial adviser.

CONTACT US

old-mutual

old mutual

Which business entity is best for tax

Getting a new business venture off the ground is an equally exciting and stressful time.
Read More

Understanding Tax Implications on Marriage

One thing that doesn’t change much when you get married, is your tax return. You still file and pay individually.
Read More

Needs vs Wants

Budgeting can feel restrictive, especially if you are tightly controlling your spending across multiple different categories.
Read More

your business

Reviving SA’s economy through events and exhibitions

In an opinion piece written yesterday in Fin24 by Solly Moeng and Glenton De Kock, “Can business events and exhibitions help revive SA’s economy?”, they bring to the surface the very frustration that we are all feeling at the moment.
Read More

Exhibitions in time of Covid-19

The event and exhibition industry has and is, facing massive disruption due to Covid-19.
Read More
10 Tips for lead generation

The best lead generating tool for the past 15 years!

Below the line marketing platforms such as exhibitions, promotions and brand activations have become the lead generating tool of the past 15 years.
Read More

in the spotlight

in the spotlight – alfred adriaan

Alfred Adriaan is a well-rounded, hilariously funny and relatable comedian with his comedy deeply rooted in everyday life.
Read More

in the spotlight – christina holt

Christina Holt has unrivalled talent within the wedding industry and she is renowned for creating some of the most luxurious weddings on the African continent.
Read More

in the spotlight – joeline botha

Joelene Botha is the owner and creative director of award-winning Durban based wedding planning company, Oh Happy Day.
Read More