As a small business owner, there may come a time when you need to raise capital. There are many ways of doing so, all of which you need to consider.
Unfortunately, some people begin to believe that a loan shark is the best option for them. As a result, they move in this direction, just to realize soon enough that it was a mistake.
There’s nothing wrong with wanting to grow your business. Conversely, you need to be smart about the financial decisions you make. Here are three reasons why you should avoid a loan shark, and instead opt for a more traditional method of borrowing money:
- The Interest Rate
Nobody wants to pay interest on a loan, but this is something you’ll need to get used to if you’re borrowing money.
The problem with a loan shark is this: the interest rate is above and beyond anything you would reasonably expect from a bank. As a result, the cost of borrowing is much greater.
- Trouble if you can’t Pay
There’s no denying the fact that you have every intention of paying back your loan in full and on time. However, if for some reason you miss a payment or slip behind, you don’t want to be working with a loan shark.
As a “lender” with no regulations, you could find yourself facing a variety of intimidating collection tactics.
- No Financial Benefits
When you use a business credit card, when you take out a bank loan, it can help build your company’s credit and boost your credit score.
With a loan shark, this never comes into play. Sure, you can access the money you need, but it’s not helping you advance your financial standing in regards to your credit.
If you have dreams of growing your business, don’t get too far ahead of yourself. Take your time, consider your options for borrowing money, and then make an informed decision.