5. A business loan can drain your business
All lending institutions are in the business of lending money to earn a profit and like any other profit making organization, they seek to maximize their profits. As an entrepreneur, you are more likely to succeed if you minimize your expenses especially when starting the business. A business loan makes this impossible since there are many additional costs that banks charge with the loans to increase their profits. Costs like registration fee, legal fee, and the high interest rates are more likely to drain your business. Further, banks hardly approve the full amount but roughly 80% of the amount that you state in your application is what is approved. This leaves you with a huge deficit that has to be covered by applying for another loan. Every application is an additional cost to your business both in terms of monthly repayments and time, thus a business loans can reduce your cash-flow by a huge factor.
