Funding
Should you use your own money or borrow from a lender? Well there are several things to consider. A lender is going to charge interest, as well as make you prove your credit worthiness. Not only do you have to show that you have the ability to repay the loan, but they'll probably ask to see your business plan.
A lender should do their homework in accessing risk, and that's a valuable contribution. Recognize that the bank wants you to succeed because they're in the money lending business, and the last thing they want is a bunch of used sports equipment and a lease on an empty building. More accurately, lenders only want to lend money to businesses that are going to succeed, and if you're having difficulty getting funding, there's a reason.
The temptation is to use your own money, own the business yourself and not have to prove your business will work beforehand. If you can leave your money for later, and use borrowed money initially, you might be in a better position.
Although you'll pay interest on the borrowed money, you'll also have liquidity for emergencies and the unexpected. Conservative business forecasts routinely have the owner taking NOTHING out of the business for the first year or more. That could be a year or two WITH NO PAYCHECK OR SALARY. Can you handle that? If not, rethink the whole approach. Not only might you not make money during your first year in business, if revenue falters you might be supporting the business. That could double your burn rate and at the worst possible time.
A lender should do their homework in accessing risk, and that's a valuable contribution. Recognize that the bank wants you to succeed because they're in the money lending business, and the last thing they want is a bunch of used sports equipment and a lease on an empty building. More accurately, lenders only want to lend money to businesses that are going to succeed, and if you're having difficulty getting funding, there's a reason.
The temptation is to use your own money, own the business yourself and not have to prove your business will work beforehand. If you can leave your money for later, and use borrowed money initially, you might be in a better position.
Although you'll pay interest on the borrowed money, you'll also have liquidity for emergencies and the unexpected. Conservative business forecasts routinely have the owner taking NOTHING out of the business for the first year or more. That could be a year or two WITH NO PAYCHECK OR SALARY. Can you handle that? If not, rethink the whole approach. Not only might you not make money during your first year in business, if revenue falters you might be supporting the business. That could double your burn rate and at the worst possible time.
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