This was a question that was posed to me today by someone who was planning to venture into a business. And I was quick to tell him that he can, but I wouldn’t really advise him to. “Why?” he asked, well, why not come along as I share some reasons behind my answer, and you can also suggest and share any experience you may have in the comments section.
First and foremost, it’s very important to understand that a borrower is a slave to the lender, well, being a slave to the lender may mean that you will have to pay back, whether the business succeeds or not. Second, the lender will be the deciding force when you fail, if you borrow from a friend or relative or any other sources that do not demand interests, paying back could be easy, though not cool. But why is it not advisable to borrow?
The Bad Economic Situation
The economy of the world is in strains, and it can be really challenging to make ends meet while things continue this way. When you ship a container load of a certain commodity and you can’t sell because of the bad market situation, the goods get bad and you just end up incurring losses. The same thing goes for manufacturing. Everyone wants to be like Dangote and Bill Gates, buts it’s vital to remember that these people have to incur losses in business. Borrowing money to start a business may not be the best as you would not be able to bounce back easily when you incur losses.
You Need a Market
This is what you need even before anything. You need to have people who need your product or service. The sad thing, though, is that you would need a minimum of 6 months + to get that market you crave. What’s the point am making here? If you borrow money to start a business and you don’t make tangible profits in the first 6 months, how do you expect to get funds to pay back? You find out that you will be selling and paying back and after you finish paying back, you are left with an almost-dead business because all financing has been channeled to repaying with interests.
But How Can You Successfully Borrow Money For Your Business?
Well, this is what you need to do:
- Start with the little you have,
- Borrow without interest with the payback time set to begin in a year after borrowing,
- Get seed funds or grants to start your business.
Business men that borrow money to expand their businesses find it easier to succeed and pay back than those who have borrowed money to start a business.
So, the point of it all is this, try not to borrow money with interests to start your business, start little and dream big, build a loyal market and you would be hitting it big when you decide to borrow money for expansion.