Are there any downsides to taking out business finance?

There are a few things that need to be carefully considered before you sign on the dotted line:

• Taking out finance is a liability – Even if a company closes down or goes into bankruptcy, debts need to be repaid or settled. Consider whether you’re in a comfortable position to afford the loan itself, as well as interest payments and fees.
• There is a risk of losing your collateral – Because loans need to be repaid, there is a cost for non-payment. If you put up a piece of property or equipment as collateral and fail to make payments on your loan, you can lose that asset. Your debtors will have a legal right over it.
• There could be implications for your credit score – Taking out a loan could lower your credit score in the short-term because you’ve acquired a liability. But if you pay on time, this will certainly improve your rating. Should you decide to borrow more money from the same lender, however, they will see you as a higher risk since you now owe them more money. And they will usually charge higher interest rates on each subsequent loan.

‍