4 Mistakes Businesses Make When Borrowing Finance

Relying too much on the finance

Alternative finance options have taken a lot of stress away from the banks in regards to business debt, however there are still many businesses that rely on finance to keep afloat.

If your business is suffering from an emergency, there are debts piling up or you are struggling to pay staff, it's important to really consider whether or not a loan will help. Whilst a business loan can ensure payday goes swimmingly and the lights in the office stay on, you should ensure you have some form of contingency plan in place to improve profits and revenue, allowing your business to stay afloat once the loan has been paid off.

Taking out the wrong kind of loan

You might know of one or two types of mainstream business loans, such as short term unsecured business loans (STUBLs), however there are many other loan products to choose from. Taking out a loan which doesn't suit your business finance model can be expensive and annoying.

For example, a restaurant that's taken out a £5,000 STUBL for a redesign might find the monthly payments difficult in times when the business is less busy (seasonal), however a merchant cash advance would allow them to pay back the loan depending on their own monthly sales. Making it slightly easier for the restaurant when they have a quiet month.

Borrowing more than you can afford

You may be offered and tempted by a lender to take out more money than you were initially looking for, and this can be a good option if you can put the money in the right place and keep the reserves for any unforeseeable costs that might crop up. It's however a big financial mistake to borrow more money than you can afford. The more you take on to borrow, the more interest you can expect to pay and defaulting on a business loan can massively impact your credit score and future financing.

The team at Choice Business Loans would never suggest taking a loan that we didn't think you could afford.

Not shopping around for the best offer

With over 40 lenders ready to give you what they consider 'affordable' finance, it can be hard to decide which lender is the best for your business. You may have read that number with surprise, as many business owners choose the first lender they find on Google without comparing prices and choice.

With the variety of options available, borrowing finance can really seem overwhelming. Choice Business Loans are specialists in alternative finance and has been setup to place your business with the right lender. Allowing for a more profitable and efficient business loan. Whether it be a short term business loan or a merchant cash advance, the alternative finance specialists have been trained to help you.