Common Challenges faced by Entrepreneurs to Get Small Business Loans

small business loan

An intuitive product and well thought out business model is the base for a favorable start of a venture.  However, this will require a continued stream of funds, to keep up the plans to being together all the ideas of a plan together.

Finances are extremely crucial for upgrading technology, hiring the best talent and coming up with an overall marketing plan. This will potentially help to make a solid entry in the product/service market. However, sourcing enough money to start your new venture can be difficult.

From jewelry to dog food to SaaS (software as a service) products, startups are popping up in virtually every field around the world, despite the risks. As an entrepreneur, you will face several challenges while seeking the funds, in part because you’ll have to convince others that your idea is a solid investment.

Traditionally, small business loan funding has been the major source for small entrepreneurs, and it is estimated that over 40% of loans are secured from informal channels where interest rates are at least twice as high when compared to the formal market. With the formalization of the economy, approaching formal sources of finance would benefit to a large extent. Currently, they face considerable challenges which deter them from approaching these sources.

These challenges include:

Lack of commitment to build a balance sheet – Traditionally the owners transacted more on cash basis to avoid taxes and in the process, they never built a balance sheet that could demonstrate the growth in the business over the years.

Lack of collateral to support the loan – Entrepreneurs fail to build personal balance sheets supported by income tax documents, particularly while creating fixed a ..

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