Best time to take business loan
Business needs investment and many time people face problem to decide whether to go for business loan or not. I have seen many businesses suffers huge losses due to wrong timings of taking bank loan.
There can be three types of situation for any entrepreneur
- To go for business loan
- Not to go for business loan
- Delay the business loan
All of us know that business loan comes with commitment to pay the business loan with interest. There are many sources available for business loan like banks, NBFCs, micro finance money lenders, friends and relatives, customers etc. I prefer to go for banks for business loan due to their well regulated mechanism.
Best time to take business loan is in any situation is
- When your business is on growing stage
- Returns are sufficient to repay loan + Interest
- Businesses needed investment
Before taking any business loan consider your Debt service coverage ratio (DSCR)
DSCR = Earnings Before Interest, Tax, Depreciation, and Amortization(EBITDA)/ (interest +Principal)
Above conditions vary from business to business for example if your business is related to health, food, emotional wellbeing etc. then this is one of the best time and if your business is about garment, entertainment, luxury goods etc then wait for suitable circumstances.
Before going for any business loan decision consult with your financial advisor.