Do all businesses need loans??

Not all business need loans.
If you want your business grow.Maybe you need it.

 

Newera I am assuming you are from the United States where a business is actually considered like a person. If you want to build credit for your business then get a credit card under your business name. This will ensure you don't spend over your budget and get the revolving credit you are looking for without being strapped down with a business loan. Another way to build your credit rating for your business is to open up a bank account under your business name. Again revolving credit is the key here. Although I never took out a business loan I assume they work on the same premise a personal loan works meaning to get a personal loan in this weakening economy for your business you need a good credit rating without that credit rating you are stuck trying to find a co-signer with squeeky clean credit to get that business loan accepted. So I would suggest researching about types revolving credit for businesses.

Edit....Here is an awesome source of information I looked up for you with some great advice with no hitches...check it out..wish you the best on your business venture! ...http://www.informedbanking.com/wiki/Building_your_business_credit

 

You should never spend every penny to start a business, just spend a little and take a loan for the rest of it. This way, you can manage both, starting new company and safeguarding your finances. You can repay the loans from the income of that company.

 

According to me, every huge business running on day to day transactions, dealing in thousands of customers daily supports its financial position by taking loans as their profit is as much to recover that loan in future.

 

it depends on the type of business and your skill.. my friend started his retail chain only with a laptop and mba degree.. is famous now..

 

not all need loans,you can start a small biz first..

 

I just started my own business with no loan, mostly becuase I was turned down. I do IT consulting and computer repair, etc.. I started in January out of my home, to keep costs down. Lost some business because I didn't have a tradional brick and mortar store. Tried to get a loan, had a good business plan, 10% of my own to start with, still got turned down. My wife and I broke both our 401k's and now we are in business for ourselves with no bank note hanging over our heads. I say try without a loan if it is possible. I couldn't be happier that I own this free and clear.

 

Do all businesses need loans??. not all business. you can start with your own money.

 

Loans are a great way to get extra cash, but unless you want to be paying high amounts of interest, you'll need to show that your business plan is successful and executable. It would be to your advantage to start small as others have suggested and then grow with your own funding as long as possible. This keeps all profits in house and gives you time to show that you are making money and growing steadily. Just the sorts of things banks and investors look for in new companies.

 

on another hand, if risk of failure is high, you would probably want put the bank's money at stake rather than you own

 

This is true only if the money is protected through an LLC or Corp. If your business fails and you still owe a large amount from a personal loan, you will continue to pay it until you pay it off, default, or declare bankruptcy. Another reason to start small, structure your business as a separate entity and then get a loan with your company's EIN rather than a personal one.

 

Yeah risk the banks money, great idea. Isn't that the type of mentality that has our country in a pinch already. The "oh well I'll just claim backruptcy if this fails". That is not the right state of mind to have. Risk your own money, then make it work for petes sake.

 

Doesn't really make any difference does it? Whether it's your own money, or a loan, it's still your responsibility.

I mean - if it's a loan, if the business goes pear shaped, then you'll still be left having to pay that back, so it is in effect your money

There are ways to get funding which will mean it's not your money & you wouldn't be left owing - but with most small businesses that would just cause delays, so if you have some cash, then great.

The only thing I would say, is be careful about treating any set amount of money as "for the business" and giving yourself the excuse to spend it, telling yourself "it's for the business"

Most of us love to spend money, it's therapy, and puting a chunk of money aside as business development money is a great way of giving ourselves the excuse to spend without guilt.

I'm speaking from experience I've done this in the past, I look back & think what the heck was I thinking!!??

I would very strongly suggest that every time you're about to "invest" some money in your business, you sit down & go over it a few times, asking yourself questions such as :

What % of my overall budget will this purchase take up?
Is it worth investing this percentage of my overal budget for the benefits of this products / service
Will I make more money from this investment?
What is the main underlying reason for this purchase?

Not a bad idea to write yourself a checklist to scan through before spending anything.

Seems silly I know - but it's amazing how easy it is to fritter away good money on absolutely nothing when you set about starting a new business & put some cash aside for it.

Cheers

Kev

 

Yeah but the person asking the question isn't a huge business

Huge businesses can often loan money risk free, thanks to the assets they own. In other words the person making the decision to loan, isn't going to get a knock on the door from the debt collector if the business goes under. When you are starting a small business, you take all of the risk.

 

that was banks' mentality to gamble investors' money, that is different

 

I believe start-up capital is the way to building real business's I mean it dosn't require a lot I've seen e-retailers that started ten years ago with £250,000 and now turn over £200 million a year.

 

Business Angels are one way that business usually go.

However, not ALL of them require loans.

 

I don't believe in debt.

 

The mentality that...

is one of the main reason it keeps getting harder and harder for small businesses to find loans. Pretending that it's not your money and you're not held accountable to repay that debt is irresponsible. If you borrow money it is deposited into your bank account, once that money is deposited it is yours to spend but an agreement is signed because you agreed that you would pay that money back with interest.

So let's say you don't repay that money and default on the loan inturn your credit is screwed up for years because of that one piece of bad advice you took. Right now as it stands you need to have above excellent credit to get a loan without a cosigner. Are you really going to risk screwing up your +++++ credit rating for a small business loan? A smart minded small business entrepreneur wouldn't dream of it. Neither should you and you certainly wouldn't dream of it if your serious about your business venture.

 

Kevt I know I just told him about what huge businesses does. As a small business, Ya you may start with your own money, with small quantity and increase gradually with the increase in your profit.