5 REASONS YOU SHOULD NOT TAKE A LOAN TO START UP YOUR BUSINESS
It is nearly impossible to start a business without money. One will need money to get a shop, buy goods, pay for publicity materials and pay your employees as well.
Money is the life wire of any business or organization hence money is one of the major concerns in the hearts of those who want to start up their own businesses. Many financial advisors recommend loans when it comes to sources of finances for start-up.
However, taking a loan to start a business no matter how big or how little, is a very big risk that one may never recover from and may lead to the folding up of the business.
Here are 5 reasons you should not borrow to start your business;
1. It shows you are serious
If you want to start up a business and you come and meet me for a loan for instance, the first question, I will ask you is ‘How much do you have?’. I have asked a lot of people this question and most of their responses goes thus ‘Nothing’.
Nothing as a response shows that you are not serious about your own business idea. If you, as a business owner, do not have a single kobo to buy into the vision of your company, why should I entrust my millions of naira and dollars to buy into your business?
There is a very important question in the Bible, that all going into business should endeavor to answer –Which of you intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it?
As a business owner, it is essential that you take the cost of your business into consideration and raise as much as you can before seeking for loans. Your savings should be considered first because there is no required repayment and you won’t have to share your profits later.
2. Unnecessary financial stress:
Borrowing to start up a business puts you in unnecessary financial stress. Most loans come with interest. So imagine you will be using the profits of your company to pay up the interest accrued by your loan over a period of time.
3. High risk of your business folding up:
According to the Bureau of Labor Statistics, about 20% of new businesses fail during the first two years of being open, 45% during the first five years and 65% during the first 10 years. One major cause of this is finances. This comes in form of failure to pay up loans on time or too many loans to pay.
4. Unnecessary Interferences
In a country like Nigeria for instance, once you take loans from family and friends to start your business, your business automatically becomes a family and friend’s business until you are able to pay off your loan.
If you are on a vacation and you upload pictures on social media, you will get thousands of unsolicited advice on how to run your business instead of wasting money on vacation.
There will be some friends and family who will come and patronize you and won’t pay because you have not paid back their loans. To avoid unnecessary interferences, avoid loans. You remain a slave to your lender until you are able to up every dime.
5. Your business may fail
I know that your business idea is great and you have great thoughts as regards it success and profitability, but the truth is your business may fail.
Have you taken into considerations what will happen to all the loans you borrow if peradventure your business fails? How will you pay back the loans? I have heard stories of business owners who committed suicide or had high blood pressure because they could not pay off their loans.
Till I come your way next time,
Be an extraordinary business owner,
Remain profitable and productive.
By Munu Ogheneochuko