Starting a business for the first time requires not only a business idea but also business capital. Small business owners often have financial problems transforming what would have been a global innovative idea into a life-changing universal product. With Glade as one of the financial technology companies ready to finance small businesses to grow and start up their businesses, business owners tend to make certain mistakes after receiving a loan for the first time. From not repaying a loan, spending the loan lavishly, not having a clear business goal, and a host of others.
It could either be a mistake made consciously or subconsciously. However, it is important that business owners avoid these mistakes after receiving a loan.
We’ve highlighted some of the common mistakes businesses make after receiving a loan for the first time below, that way you can avoid these mistakes and ensure you are ready for the loan repayment process for your business.
Not Meeting Payment Deadlines
This is a very common mistake among first-time loan recipients and it’s not also uncommon for small business owners to miss a payment deadline once or twice because of various reasons. Sometimes loan recipients forget to make their payment even when they have the money to pay back.
It is important to responsibly manage your business loans by making early payments to avoid more accumulation of interest and defaulting communication with your lender. You can set reminders to the due date to assist you to stay consistent in managing your loan.
No clarity on the use of funds
Even after receiving a loan as a first-time business, unfortunately, most small business owners do not have a well-detailed idea of how they are going to spend the money they have received.
Spending money on poorly developed business plans or not spending it at all on the business. Having a clear goal on how to use the loan for your business is important as a first-time loan recipient.
Failure to nurture lender relationship
Building long-lasting relationships with customers lead to great business success. In the same light, It is also smart that as a first-time borrower, you nurture the relationship with the lender.
This is a mistake that should be avoided because if you are hoping for futuristic business success, you are going to have to maintain a good relationship with your lender.
Communication of business cash flow.
Communicating your cash flow issues with your lender allows your lender to provide alternative loan options suitable for your business.
If you hide your cash flow issues to the lender and get the loan. You would be shooting yourself with unavoidable issues after getting the loan. For instance, not having a high credit score, not having great sales volume, not being able to meet up with repayments, and so on.
Communicating your cash flow problems early gives you an advantage while managing your loan as a first-time recipient.
The reason why Mr. A is in debt and Mr. B has built a successful business and paid off his outstanding loan is because Mr. B managed his funds effectively.
Accurate money management is what sets you apart from every other person receiving a loan.
As a first-time business owner, it is pivotal to do a proper analysis of your business projections. That way proper allocation of the funds you’ve borrowed would be used adequately so that every Kobo can be accounted for.
In conclusion, Many entrepreneurs have made mistakes after receiving loans as a first-time business which have resulted in extra expenses, repayment penalties, unsuccessful payment fees, business failure, and many more. But you can avoid these mistakes by communicating with your lender, meeting payment deadlines, managing your finances efficiently, and having a clear goal.
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