3. Stringent Regulations
One of the reasons for starting a business is to apply innovation and creativity in producing goods and services. Entrepreneurship thrives best when there is flexibility to innovate and think creatively. A business loan limits your ability to run your business as you may want. A majority of small business loans come with regulations requiring an entrepreneur to run the operations of the business in a certain way, maintain a certain level of cash flow or maintain a specific level of liquidity. If you don’t comply, the bank can demand that you pay the remaining portion of the loan in one installment. Regulating an entrepreneur can lead to business failure due:
1. Your original business concept can be changed by the regulation
2. You might end up running a business model that is not in your business plan
3. If you violate the regulation and the bank demands total loan repayment, you might end up with cash flow problems.