When loans are considered illegal?

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In this present economy, it is becoming increasingly difficult to run a small business with just money from your pocket. You have to have extra capital, which can be in form of loans or support from family and friends, to operate and scale your business. As such, the requests for loans from loan sharks and banks have increased, but more often than not, most of these people are turned down because their reasons are considered illegal.

One of the reason people take loans is because their business was attacked and hence, they lost some money. You might want to avoid the need to take loans by opting for AIG insurance services. It is expected they will be able to cover for the losses you are insured against should the need arise. You will be saved from taking an illegal loan as well. This should be after you have read what other people in Finland who have used their services are saying about them on Suomiarvostelut. Here are some of the reasons why loans could be considered illegal.

No collateral or consistent cash flow

A lot of people lack sufficient collateral and this hinders them from getting a loan. Most loan applications require that a viable piece of collateral be provided before funding is secured. While this is not a problem for rich individuals and large businesses, it is for small business owners. Also, loan sharks and banks favor businesses and individuals who have a steady stream of income over those who don’t. They believe that loan seekers must first have the capacity to pay back their loans before they get the money.

Debt-to-income ration

Loan sharks and businesses are wary of giving loans to businesses and individuals who have existing debt. Debt isn’t a good thing to pile up, and multiple debts usually lead to default. In most cases, businesses that have secured financing previously are cut off from taking loans. Since many business owners look for funding from different sources, this is a major obstruction on their way.

Non-diversity in clientele base/income source

Banks are often careful of giving loans to businesses whose customers are only a select group of people. A lot of banks like clientele bases to be as diverse as possible. Relying only on one set of people paints the business as one that can survive when the economy is harsh since most of the regulars who patronize them will be financially handicapped. Also, individuals are encouraged to have multiple sources of income as relying on a single source is suicidal.

Insufficient financial history

Before any loan is disbursed, banks and other financial institutions request to see a financial record. From this, they determine the individual or business’ money habits, their significant improvements, etc. No one wants to give money to a business or individual that hasn’t recorded some amount of credibility and success. There should be a track record of getting profits for some time before they can be qualified for funding.

Economic concerns