News Americas, NEW YORK, NY, Mon. July 15, 2019: The era where youths took over and sought ways of expanding the family businesses or went in search of the routine, white-collar or blue-collar jobs in the public and private sectors is so far gone. The white-collar jobs are not even readily available these days, be it in the public or private sectors.
Nowadays, youths are more interested in the constant search for opportunities to provide solutions to those problems that have bothered the marketplace over a long period of time. They venture into new opportunities through which they can uniquely design answers to age-long challenges.
The modern, technologically driven era has seen an increase in the desire among youths to be a part of the small startup culture. This startup culture has brought about various simplified means through which we are able to connect easily with friends across the globe, hire cabs, make easy financial transactions; it’s seen the creation of new job portfolios, sources of renewable energy, waste management alternative options, among other new innovative solutions.
Being a business entrepreneur at a young age does come with quite a few challenges. For starters, testing and growing the business, recruiting the right team that buys into your business idea and work ethics, and making headway among your competition in the marketplace are a few of the challenges faced by young entrepreneurs with small startups. A sufficient capital base is a number-one challenge a lot of young business entrepreneurs face in modern times. The survival of any business venture is decided by funds that would facilitate the running and promotion of the business brand.
One of the available options before any entrepreneur is a business loan. This can be used to meet the financial requirements needed to start and run a small startup.
A young entrepreneur can seek funds for his or her business venture by approaching money lenders or companies in the business of investing in sound business ideas. But for a number of reasons, the preferred option for a young entrepreneur should be getting a business loan. The reasons are:
- It is much easier to get a business loan
- You do not need to dilute the value of the company’s equity
- Financial lending institutions have laid out structures to fund different categories of business
- You only pay back the loan with interest
- Lenders do not want a share of your business profits
There are different kinds of business loans made available to young entrepreneur these days. These options are:
Short-term loans: This kind of realistic loans helps the entrepreneur with the means of funding the working capital needed to start the business venture.
Long-term loans: This is usually used to fund long-term plans or projects such as the expansion of the business.
Secured loans: This kind of loan comes with a lower interest rate since the borrower acquires this loan after depositing collateral.
Unsecured loans: This loan has a higher interest rate, as they are given out to the borrower based on his or her credit score rating. They are short-term, though, because there is a higher risk of the borrower not paying off the debt, resulting in classifying such loans as bad debts.
Overdrafts: These loans are based solely on depositing some form of collateral, which is in the form of a fixed bank deposit. After the borrower’s credit score history cash inflows and outflows, as well as the duration of his or her relationship with the bank have been investigated, the limit for the overdraft is then set. The interest rate is charged on the amount used for the overdraft.
Term loan: This is a standard kind of loan, with the entire loan amount disbursed and an Equated Monthly Installment (EMI) plan is put in motion for a specified length of time.
Working capital loans: Loans of this kind are solely given out for the young entrepreneur to utilize as the working capital needs of the business venture. This loan requires a form of collateral, even though it comes with a lower interest rate in comparison to the overdraft loan. This loan can be revoked if the bank is not satisfied that the loan conditions have been met after going through the borrower’s cash flows, inventory, receivables, and other financial assets.
It is paramount that the young entrepreneur takes several factors into careful consideration before making that application for a business loan. The interest rate, fees to be paid for processing and documentation, as well as the time span for loan disbursement and the repayment schedule are just some of the factors to be considered. Others might include early payment possibilities, renegotiating the loan, bi-monthly payments, etc.
The most significant factor to be successful in your application for a business loan is definitely your credit score rating. As most financial lending institutions require some form of collateral, deep thought should be given as to what particular asset should be used as collateral. The collateral could be valuable machinery, landed property, or the expected profits returns from the business venture.
After the loan has been successfully processed and disbursed, it is important that the young entrepreneur takes note of the important dates in the repayment schedule so as to avoid missing any. Here are a few tips to consider in keeping on time with the repayment schedule:
- Have a set reminder of all the important repayment dates so you deposit sufficient funds into your bank account
- Have a sufficient balance in your bank account to meet with payments a when due
- Discuss it with the bank ahead of the repayment dates if there is a chance you might miss it
- You can meet and catch up with your repayment schedules by funding your bank account with help from a different financial lending option available to you.
The bedrock of the economy of any nation, be it a developed or a developing economy, are the small and medium scale enterprises and startups set up by the young. The governments at various levels and institutions of financial lending have it as their responsibilities to make it easier for youth to achieve their desired business goals. Applying for and getting a business loan at a realistic interest rate to fund your businesses and quickly promote your brands is, therefore, made more easily accessible.
Also, it is important to state at this juncture that a working business plan should be created. This is to ensure that the goals of the company are pursued. The young entrepreneur has to work according to the business plan initially created. This prevents working haphazardly and ruining the business. The business plan would provide guidance on the right time to apply for a loan and what type. Without a business plan, loans might be taken out for unnecessary expenditures, and this could lead to financial problems for the entrepreneur.
Duly considering all these will give the young entrepreneur an edge while applying for a business loan. He or she will be adequately equipped to answer likely questions that may be asked concerning the loan. It would also help guard against financial challenges in the course of running the business.