Accessing small business loans is challenging, especially in the early stages of entrepreneurship, because the lack of capital can stifle any company.  According to the 2019-2020 Global Entrepreneurship Report Monitor, one of the main reasons for abandoning a business is not having access to financing, therefore, when you apply for a loan and even more when you get it, you should focus on using it wisely. 

With the help of a loan your business can obtain advantages, one of the main ones is that you can finance business expenses or investments such as the purchase of raw materials, machinery or perhaps, execute an expansion plan to have the company of your dreams.

But these dreams can quickly turn into a nightmare. It is very important that you keep your goals clear and do not divert the destination of these resources. Temptation to use the loan for personal expenses can be huge, so you must be careful and not forget that the main goal is to grow your business.

If you’re still not clear on how to take care of this capital, here are some Do’s and Don’ts after you receive small business loans.

small business loan


Stick to your plan

A request for a financial loan should come from a thorough analysis of your business needs with clear objectives for its use, do not divert it for other purposes. Keep a rigorous administrative control of the loan, spend it as planned and avoid variations at any costs.

Keep apart your personal expenses from the loan

Don’t mix your personal and business finances. Manage a different bank account for each purpose. To keep a more effective accounting and better control of your income and expenses, is important to mark this difference.

Get to know your loan characteristics in depth

All credits have clauses that you must check thoroughly if you want to avoid future confusions. Repayment terms, amortization, origination fee, interest rates, prepayments, late fees and other details will help you get solutions in moments of crisis and understand different scenarios you may face when obtaining small business loans.


Don’t use it as emergency money

Emergencies are a constant in the life of a business, using the money from a loan that was assigned for a purpose in some unforeseen events will only increase the crisis. Use the financing to get more customers, profits and assets, not to repair cracks.

Not keeping accurate accounts

A recurring malpractice among people who access small business loans is to do math on their mind. If you want your money to be used to its fullest, you must know what every penny is invested in, and in the same way, know where the money will come from to pay off the credit each month.

Not making use of the loan you received

In case you have acquired a credit without a precise objective, don’t hold your money back. Analyze options for early payments to your suppliers or invest in innovation and advertising. Loans are made to be used and to be paid.

The best way to take advantage of small business loans is to pay them on time to avoid penalties. This will allow you to improve your credit score and to apply for larger financing in the future.

Is your company using the loan to the fullest?

There are financial products for every need, the characteristics of each one are different and they are adjusted to several situations. Remember that it is not convenient to use a personal loan to consolidate a company’s expense, the best option will always be to obtain business financing that offers better interest rates, since they are designed specifically for these needs. Loans management will dictate your credit score and your business’s future. Usually, the request for financing is given when money is needed and in case of an eventuality, so bad management can appear immediately. Generate business plans and objectives that help your company reach its potential with these resources. Are you ready to get your first small business loan?

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