Government Loans for Fisheries: Dangers

Government loans are typically more affordable and offer better terms than private loans. The government takes a stake in promoting business, meaning it has more to gain from your loan than just the interest rate. In terms of loans to fisheries, government loans encourage development of sustainable businesses. To do so, there are many direct loans offered. This means the financing comes straight from the government and not through a private lender. While these can be financially solid loan quotes, there are also many dangers when working with the government to finance your business.

Government Regulation and Intervention

Taking money from the government is, at the heart of the matter, signing a contract with the government. Whenever you contract with a government agency or program, you should be prepared to see increased regulation of your business. You will have to meet all safety, health and financial regulations perfectly. This means implementing certain changes government inspectors or regulators see necessary. It also means your accounting and tax forms will be watched closely. Essentially, you must open the door to your business anytime the government wants to review your operation. If you do not comply with suggestions or demands, you may lose your financing and be obligated to pay off your debt immediately.

Loan Regulation

Aside from regulation on your business itself, your loan will be regulated much tighter if it is provided through a government agency. For example, you will have to meet restrictions on any additional financing you can take on. This means you may not be able to take another loan while your government loan is still active. If you plan on taking on investors or changing your management structure, these changes will have to be approved by your government lender. The good news is most government loans can be prepaid without a penalty. If you want to shake the restrictions in favor of a more flexible loan, consider prepaying the loan with a refinancing loan from a private company. You will lose the low-interest benefits of the government loan, but it may be the only option to allow you to make necessary choices in the future.

Loan Delays

It is not just a stereotype that the government moves slowly. When you move through the application process, you will have to defend and refine your business plan many times over for loan approval. Your citizenship, income, experience managing fisheries and other factors all must be verified. While a private lender may have efficient ways of doing this, the government is rarely as efficient and may require several rounds of paperwork. Once your loan is approved, the delays will not stop.

You may not see the funds in your account for months. Even then, they may be placed in an escrow account. You may only be able to take a limited amount of funds out at a time, and the government may even require you supply information on where the funds will be directed. If you need fast financing, a government loan may not be the best choice.