Business Owner Signing a Loan Contract

What are the Issues with a Business Loan?

Video Transcript

So the issue with a business loan and look, they’ve got their purpose and they are very good. If you need a business loan to go and buy a piece of capital equipment or to upscale the business to take on a new project, then it may well serve its purpose. But the problem with the business loan is that a soon as you take the loan, you need to start repaying it on a principal plus interest repayment schedule, which is typically on a nine or twelve month loan.

So these loans tend to be short term, short twelve months loans. So therefore, the repayment schedule is quite significant, which means that unless you can afford, unless you’ve taken that money to improve your business and grow your business, and as a result you’ll get an improvement in your income in flow, by taking a loan, you may actually result in your business going backwards because you can’t afford to make the repayments. Where is within invoice finance, it’s not a loan, there are no repayments. You are accessing the cash that’s owed to you anyway from your customers, and you don’t repay that, the debtor pays it when they pay on the agreed payment terms.

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