Should you borrow?
Knowing when to borrow money or secure a loan for your new business
There are countless problems involving money. In fact, there are many individuals and businesses that cater to those in need of financial assistance. Borrowing money however may be tricky especially with the pressure of the conditions set forth by the rules of the contracts involved. The trick is to know when to borrow and with whom to borrow money from.
There are various reasons why an individual or a company resorts to securing loans. Some of the reasons include:
• To start their restaurant business
• For cash flow
• For business expansion
Thus, the motivations behind the act of borrowing money vary; and people having these common reasons for such loans have become target markets for lending institutions.
Included below are sources of financial help:
• Credit Unions
• Network of connections
The Do’s of borrowing money
1. Do your research. Before borrowing money be sure that the interest rate is within a reasonable range.
2. Do compare. Choose the best financial institution that will give you the best value for your money.
3. Do consolidate your borrowing activities to one account. By doing this, managing your finances will be a whole lot easier.
4. Do check out the contract. If you are to sign for a loan, make sure you will be able to be abide with the rules set forth by the conditions of the contract.
5. Do avoid high interest loans.
6. Do make sure that you can pay the loan to avoid bad credit.
7. Do borrow if it is of utmost necessity. Make sure that you need the loan and that you are paying interest for a worthy endeavor.
8. Do keep track of the deadline of payments to avoid additional charges or fees.
Borrowing money may be scary at first because of the risks involved. However, if you are able to invest the money well and use it to earn more money to pay your debt then it becomes a calculated move with financial benefits. This is why the business plan, marketing analysis and other steps we have covered are so important.
Funding your business may require you to apply for a loan. Otherwise, you may opt for an investor to fund your business instead. Attracting investors may be done with the use of a good business plan. After which, the problem will lie on locating investors who will be willing to invest.
There are various ways to look for investors; the easiest of which is through your personal connections. In fact, family members who are financially capable of investing are good people to start presenting your business plan. Moreover, family friends or college friends and colleagues looking for ways to make profit may be interested in your business venture.
Another way is to advertise. Finding investors with credible backgrounds are of utmost importance. These potential investors are also on the lookout for promising business concepts and they may very well be looking for something to invest on in the classifieds—where some are seen to make their need to invest known to the public. Also, some have also been able to locate investors this way. Just make sure that your investor won’t end up stealing your business concept and start the business themselves.
Investors may sometimes offer more than financial help in ensuring the success of your business. This is especially true when your investor specializes in the same field or industry that your business caters to. These investors know the market very well through experience and may be able to give you sound advice on how to run the business. Also, as they invest their money in your business, they will be very concerned with the status of the business and with the return of their investment.
Borrowing money from any financial institution or any investor for that matter; requires a high sense of responsibility. It isn’t something to be belittled and it should be accompanied with a competent plan to ensure payment of the loan or the return of investment.