A lot of people, especially business owners, are scared to take loans to support whatever they need money for, partly because of what they have heard about the troubles that come with taking a loan, the dragging by creditors, and partly because of the interest rates.
Know this, taking a loan is not totally a bad idea, in fact, there are business owners who had been able to grow their businesses because they took a loan.
However, if you don’t understand the concepts of how loans work, I’ll advise you to stay away from it. This is the first thing you need to consider, know the concepts.
Your reason for taking a loan must be genuine.
If you need a loan to support your business, let it be for that business. Don’t take a loan to boost your business and use it to buy home appliances. Don’t take a loan to pay for the children’s school fees and use it to buy a car.
Have a cogent reason for taking a loan.
There are different kinds of loans: personal loan, business loan, home-equity loans, emergency loan, etc.
The best loan you can ever take as a business person is a small business loan, i.e, a loan you take to support your business.
If you are a start up, you can take a loan as low as #1,000 to as high as #90,000, which attracts an interest of 3?5%. SMEs can take as high as #1m (which attracts an interest of 5%), this is when you are dealing with a cooperative.
Before you take a loan to support your business, be sure you’re really making sales. Don’t take a loan when you know sales are very slow, this is the mistake most people make.
You can actually pay up a loan before the due date, how? If you’re making sales.
Let us assume you took a loan of #50,000 to support your business and the interest rate is 3.5% over a period of 3 months, that means you will be paying back the sum of #51,750 after 3 months.
Now, you are making sales everyday. Spread that #51,750 over 3 months (84 days), which means you’ll be paying about #617 everyday. So, if you’re paying back #700 everyday, you would have paid back within 75 days instead of 84 days.
Next, I’ll be telling you things to consider before taking a loan.