Know the most common mistakes when applying for a business loan

When a business owner is faced with a strong financial challenge, one of the solutions for him may possibly be to apply for a business loan.

Contrary to common sense, generating such debt is not a sign of weakness – on the contrary, it can mean growth.

But to ensure that the loan does not become a headache, the business owner must take some care not to make management mistakes. In this way, tight financial control can leverage your business with the help of a well-planned loan.

Avoid the misconception that a bad loan may pose to your business. Check out some of the most common mistakes made by entrepreneurs and beware!

Make a loan without the real need

Entrepreneurs, especially small ones, usually make some management mistakes for lack of skill or experience in the subject. In such cases, the decision to borrow a business may be premature if not properly analyzed.

This type of misconception can lead to a number of difficult administrative pathologies to circumvent. Thus, the manager needs to be aware of some economic indicators that will help him choose the best time to apply for the loan. Check out:

  • liquidity ratio: represents the company’s ability to meet its obligations;
  • debt ratio: shows how much is spent on the company’s current obligations;
  • Profitability ratio on sales: represents the profit obtained from the production of its sales in each period;
  • Activity Index: Indicates the average time it takes the company to receive for its sales.

Careful analysis of these indicators will shed light on whether lending is indeed a viable tool for your business in the scenario in which it finds itself.

Owning a poor financial organization

Owning a poor financial organization

Lack of organization is inconvenient for any decision, but at the administrative level it is particularly dangerous. A good manager must maintain strict control of his financial operations to better manage the resources and obligations of his business.

If this control has financial planning errors, there is a high possibility of serious complications during the loan taking and use process. Thus, an economically organized manager can avoid the snowball effect on debt.

To assist you in this type of organization, there are several tools that keep you up to date on the economic situation of your company, such as:

  • electronic spreadsheets with periodic control;
  • personal notebook of the company;
  • Mobile financial apps that are efficient and can be viewed from anywhere.

Missing objectively when using loan

Debt cannot be made lightly, and in the case of a loan, strategic planning is needed to define where the money will be spent.

Often, entrepreneurs end up requesting more resources than necessary. To avoid such scenarios, you should resume your analysis with the economic performance indicators and direct in advance where you will apply it.

The resource acquired with the loan cannot be diverted to functions that were not previously thought of. In this way, the manager will avoid taking more than necessary with the bank, as he will be forced to use the money as intended, or will lack money.

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