Loan-Lending Practices Entrepreneurs Should Shun
There comes a time when a businessperson may require to take out a loan. The loan may be for start-up purposes, for business expansion, or for getting a company out of a financial jam. It, however, shouldn’t mean being put through degrading practices and procedures to get a loan. An entrepreneur should be able to get an easy business loan to run his enterprise and should, therefore, shun lending institutions that discriminate, take long periods to process loans, and anchor on outdated requirements.
The bias of institutions in lending loans should be a complete turn-off, regardless of the business benefits. A lending institution that treats borrowers differently based on gender, age, or business level isn’t suitable for any business.
The treatment could be in terms of preferring headed by older people over those run by the youth, favoring male-run businesses over female-run businesses, or preferring established companies over start-up businesses.
The financing institution perpetuates discrimination by putting unjustifiable high interest rates on the less preferred group, or imposing unnecessary hurdles on the group.
In this age and times, a lending institution ought to base its decisions on objective factors such as credit ratings of a company, and not subjective factors such as age and gender.
Period of processing loans
Time is money, and time saved in a business is money earned. A credit that takes more than seven working days to process is terrible for business. Such a delay in granting a loan could translate to a missed business opportunity. Missed business opportunities reflect negatively on the book of accounts. Several missed business opportunities, in the long run, result in losses.
Long periods of processing loans also lead to prolonged anxiety. A loan applicant is ever anxious about the outcome of the application. Was the application accepted or rejected? Shorter loan processing period enables the business owner to know the status of the loan application within a suitable time frame. He’s thus able to maximize business opportunities by looking for an alternative source of funding, in case the application is rejected and loan denied.
Elimination of anxiety and exploration of alternative source of funding saves both the business owner unnecessary health implications and uncertainties in the business, respectively.
An institution with shorter loan processing time, ranging from 24 hours to less than seven working days, is what a businessman requires as a suitable partner.
With improved technology, some conditions that may have been applicable years ago before lending a loan are now obsolete and outdated.
These requirements could range from the physical presence of the business directors when advancing the loan to limiting collateral security to traditional forms, such as title deeds.
With changing times, most transactions are conducted online with no need for a physical meeting of those involved. This, too, should apply in loan-lending to cut the costs and time used to enable a physical meeting.
Lending institutions should also be open to new forms of security such as Local Purchase Order (LPO) or be shunned by entrepreneurs.