What risks are involved in small business loans in Dubai?
Business loan are pretty easy to get and there are so many credit companies or banks waiting for you to take them. However, in order to get the best out of your small business loan, you need to get the five Cs of your credit covered; capacity, capital, character, collateral and any other conditions required from the lender. The easiness or convenience of getting a business loan in Dubai does not make it risk free. So, following are the risks that you need to consider before taking any step further.
Standard Business Loans
In this kind of loan, you pay a particular monthly payment for a specified time period. The terms and the amount of payment are not adjustable with time. However it may change if you are taking a loan which has variable rate. A few banks will help you extend it like the amount they offer for improvement of home. The payment varies with what the owner is using. In this kind of loan, the bank makes a business account for you and handles the payments automatically. If you can’t keep up with the terms and conditions that the bank requires, then it will have every right to garnish your account.
Loan from a Loved One
You can also take a business loan from a friend or simply a family member of yours. The best thing about this kind of loan is that the terms are flexible and the interest rates are not as much as that of a bank. The risk involved in this kind of loan is that you might end up ruining a very perfect and close relationship.
If a local bank denies you a business loan in Dubai, then you can apply through Small Business Association also known as SBA. If anything goes wrong, the association asks the government to give most of its investment back. Now, in this case, the lender wills more to extend the credit. This loan is perfect if you are opting for a small business but as mentioned above, there are risks involved in it too. If you default, you will pay the government what you borrowed. If you can’t give it back, then the government will come on you as hard as it can. The consequences are pretty worse and that is why most of the people avoid getting into it.
Credit Card Loans
Small businesses are free to take advance cash from credit card. The worst thing about this kind of loan is that it has the highest interest rates. Once you get in debt, it is really hard to get out of it but it is still less consequential that SBA backed loans.
So, every kind of business loan comes with some kind of risk and it is perfectly understandable because those people trust you with their money and they need some security. Some cover this harsh reality politely and some go the other way.