Both in times of economic growth and recession, you hear the need for governments and especially banks to provide loans to small businesses to spur and expand the economy. Well, understanding that our economy is based on credit, I don’t see any wrong with these sentiments at all. However, what you don’t hear often enough are about the small businesses that won’t and in most instances simply can not repay the loan once it’s obtained. Let’s not even talk about payoff. This part of business lending doesn’t get enough press as it should. Not in a way that would scare or intimidate people from starting and operating businesses with commercial loans, but in a way… yes. Here’s why…
Know What You’re Really Getting Into By Getting a Business Loan
Oh let me count the ways… not really, but maybe one day. For now, though, understand that if and when you apply for and obtain a commercial loan, YOU MUST PAY BACK WHAT YOU OWE WITH INTEREST. Common sense you may say, but not so common I would respond. Business loans from a bank with or without a government guarantee ARE NOT GRANTS. Not to sound contrarian, but one way or the other, you will repay. OK, even in the event that the bank or lending source has to take a loss, trust me, the probability of getting a business loan anytime soon is really low. Not saying impossible, but damn close my friends.
Why is Business Loan Repayment Important?
Credit rating and reporting… need I say more. Both personal and business credit ratings and reports are significantly impacted by your ability to pay on time and as agreed. Again, our economy is built and functions on the foundation of credit. This is another way of saying you are trustworthy and operate with integrity. Heck, if you don’t pay people let alone the bank on time and as agreed, then you’re not operating as a trustworthy person. Now, there’s an understanding that life happens and unfortunate events befall the best of us. I would venture to state that there’s mercy for the person that communicates these life happenings in a proactive manner rather than running for the hills and hiding.
Understand and take to heart then that business loans are NOT FREE MONEY. Know the details and full scope of what you’re signing up for and plan accordingly in the event life happens.