Borrowing for Business Funding: Caution Tips
Hello friends, happy second weekend of June, 2020. I'm so excited that we've made the most of these times to learn how to raise funds for our business and I'll be glad to see many leverage the bootstrapping, bartering and the TTP Code techniques we've so far covered to have their entrepreneurial ideas funded. For a truth, finances is not the entrepreneur's problem, all he needs is the right knowledge, people and strategy.
Let's take a look one critical module of fundraising for business - "borrowing". This is one controversial option as many are of the opinion that start-ups should never go near this option. However, I'll say "caution" is needed for borrowing when the right idea and business strategy has been pitched by the entrepreneur.
The emphasis of this discussion would be the "Caution Tips for Business Finance Borrowing". This should firm a guide when borrowing is the last option the entrepreneur has.
Note that we all borrow from others - Other People's Money (OPM), Other People's knowledge (OPK), and Other People's Experience (OPE). All three are significant in business success.
Summarized below are a few tips we need when borrowing becomes as option for our business funding. I had at some time borrowed money to finance my projects, I have also been around some entrepreneurs who borrowed. This is a summation of the lessons drawn form finance borrowing:
- Go to friends and family before you go to the bank. Choosing this class of lenders would reduce the tendencies of being hurt should the investment fail.
- Spread the risk. Don't borrow from one source. Instead of getting 1 million from one source, go for 200,000 from 5 sources.
- Create a solid plan before going to borrow. As earlier said, every business man or entrepreneur must draw a solid financing strategy for his business.
- Anticipate the Unexpected and make provisions for contingencies. This means get 550k for a budget of 500k incase of inflation, price hikes which might crumble the startoff.
- Start small and grow big. Every entrepreneur must know he value of organic growth in business. Get the long term mentality. One of my mentors say "Don't start so big that you lose tough of the grout".
- Seek expert advise - This is where to draw wisdom from.
- Develop a plan B (Answer the "What if" questions). This is your own personal pan different from what you had earlier showed investors.
- Develop a plan C. This is your repayment plan. Like an instalment plan. This should be adopted only if plans A and B fails.
- Develop a plan D. This is your failure plan. This should e adopted only if A, B and C fails.
Funnily, borrowing cannot be taken away from finance, that is why we are having the emergence of Decentralized Financing (DeFi) within the blockchain space. However, every investor must gather sufficient information to guide such decisions, just as needed for other business funding options so as to avoid regrets.
I would be glad to share thoughts with you on this subject. Let's maximize the comments section of this blog post.
Great idea. I think we need to have a business mindset before we can do business with debt. Second, we must make our passion into profession.
Loans are always an option for anyone, and if you are going to undertake much more, but you should be cautious as many times lenders want to take advantage of the other person's need.
"all he needs is the right knowledge, people and strategy." you forgot to mention mindset!
Nice article. I often have business ideas and have a hard time asking for funding. My setback is that I want to start website blogs and the investment is about 500 USD. It feels like a large sum to take from my budget, saving a little at a time seems to go wayward, yet it doesn't seem like a large enough fund to approach people to borrow for.
I will take your article into consideration, make a more clear plan, and think about approaching 10 family members about borrowing $50 from each person...
PS> I have read your HIVES articles regarding the sportstalksocial token. I think there may be waaaaaaaay too many tokens for it to be a profitable project, but you seem to have such a drive for making it work that I have started collecting them too.
I also wrote a few articles.
The deadly trap of a business loan is getting too much at a time, just like you suggested it is best to take things slow if there is a need to obtain a loan at all, it should be little at a time.
Seeking expertise is something we do not like to do but it is the best decision to make before we make any important decision like getting loans.
The sad fact is that the friends and family who are meant to borrow you money will keep cooking up excuses to avoid lending you the requested amount even though they may have it in their possession.
Thanks for sharing this great post with love from from@hardaeborla and I hope you have a great day ahead
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