As a young person looking to start or grow your business, securing funding is one of the most critical steps.While funds may not always be readily available, many entrepreneurs turn to bank loans to fill the gap.However, although it may seem like a logical choice, some individuals take out loans without proper planning. This often turns what should be a boost into a burden.Recommended For YouSports2025-06-05T14:33:47+00:00Spain vs France: Ballon d’Or hopefuls Dembele, Lamine clash for Nations League final spotLifestyle2025-06-06T10:40:20+00:006 signs you’re eating too much sugarEntertainment2025-06-05T16:10:58+00:00FBI arrests another Ghanaian alongside Nigerian tech influencer over cyber fraudWhether you’re setting up a retail provision shop, launching a large-scale clothing line, or starting an agro-processing venture, here are five key tips to help you start smart when considering a bank loan for your business. ALSO READ: 5 risky business ideas you should never invest in1. Know Exactly Why You’re BorrowingHaving a specific purpose helps you determine exactly how much funding you need and reassures the bank of your planning capabilities. Borrowing without a clear goal can lead to overspending and mismanagement of funds.2. Prepare a Solid Business PlanBanks need evidence that your business idea is viable. This is where a well-structured business plan comes in. It should include:A clear description of your product or serviceMarket research and your target audienceCompetitive analysisFinancial projections (cash flow, expenses, income)A loan repayment strategyPro Tip: In Ghana, support is available through organisations like the Ghana Enterprises Agency (GEA) or National Entrepreneurship & Innovation Programme (NEIP) to help you develop your business plan.3. Understand Loan Terms and ConditionsNot all loans are the same. Take the time to understand the interest rates, repayment terms, and any hidden charges. Ask the following:Is the interest rate fixed or variable?What is the repayment period?Are there any processing or administrative fees?What happens if I miss a payment?Always request the Annual Percentage Rate (APR) to understand the full cost of borrowing.4. Know Your Credit StandingIn Ghana, banks assess your credit record through the Credit Reference Bureau licensed by the Bank of Ghana (BoG). A history of unpaid loans, bounced cheques, or outstanding mobile money debts can damage your chances of securing a loan.To strengthen your credibility:Clear any outstanding debtsMaintain good records of financial transactionsBuild a relationship with your bank through an active business accountA clean credit history builds trust and may qualify you for better loan terms.5. Be Ready with Collateral or a GuarantorMost bank loans in Ghana are secured loans, requiring collateral such as land, vehicles, or savings. If you don’t have assets, you may need someone who is financially stable (guarantor) who agrees to take responsibility if you default.Fortunately, government-backed schemes like MASLOC and other youth-focused programmes offer more flexible financing options for young and female entrepreneurs who may lack collateral.ALSO READ: Ghana and 9 countries with the most IMF debt (May 2025) – See listConclusion: Borrow Wisely, Build StronglyTaking a bank loan is a significant step. If done wisely, it can accelerate growth, strengthen your brand, and help you achieve your business goals.If done poorly, it can lead to a cycle of debt and missed opportunities. Always borrow with a clear plan, fully understand your obligations, and ensure your business can support the loan repayment.Meanwhile, here are 5 simple ways to improve customer service today as a business.