Is it worth taking out a loan to start a small business? Do I need to take out a loan to open and develop my business? Is it worth opening a business on credit?

It is very dangerous, but not for you, but for the bank, which is why banks do not issue loans to startups. But all companies and businesses that exist in the world are built on borrowed funds. And your business will also be built on borrowed funds. But at different stages of life, the company uses different sources of money.

Companies take loans from banks at a time when the business is already built, and the entrepreneur needs more money in order to expand, or just needs to close. The entrepreneur understands, for example, that there was money, there will be money, but now there is no money, and he asks the bank for it. Even for well-performing and stable companies that do not create a working capital reserve, situations can regularly arise when payments to counterparties need to be made today, and payments from clients for completed contracts will arrive only a month later.

The company goes to the bank and usually gets a loan at a low rate if it can prove that it runs a stable business and receives constant payments from customers for its services. This is similar to the situation with your credit card, which has an overdraft. You ran out of money two days before your salary, the bank sees that you generally have regular cash receipts, and lets you go negative for free, return it in two days. So it is with companies: if , the bank will most likely give the company a very cheap loan, because it knows that it will receive payment from customers and return it. You will need to be able to repay the borrowed funds, and then your company will receive a loan.

When we talk about risks in economic decision making, we relate the risks to the potential reward that can be obtained if this risk is taken on. This is how entrepreneurs assess the situation when they decide to replenish the working capital of the company and invest in a new division of their business, for example, open a new cafe. They compare how much money they need to spend now and how much potential profit growth they will receive after a certain period. And in the same way, investors assess the situation, who think whether it is worth giving you money, and how much they can earn in the future.

The bank operates in the same logic. When giving you a loan, he thinks about what percentage he will earn and what is the risk that you will not return the borrowed money. In a simple model, the higher the risk, the greater the potential payoff.

The bank issues a loan to the company to earn on the interest that the company pays on the loan, and on additional services and commissions that the company will pay to the bank if it does not return the borrowed funds on time. This means that the bank will earn not a very large percentage on such a loan. If the earnings are not very high, then the risk should not be very large.

The higher the risk, the higher the potential reward should be. Banks operate in situations of lower risk than investment funds and others. If you are just starting a company and you really believe that you will succeed, you can try to convince those who regularly invest in new businesses that your idea is attractive.

Since a startup cannot predict expected cash flows with sufficient accuracy, it borrows money not for return - in the form of a loan, but immediately shares equity capital with those who are ready to invest in its initiative. That is, you are going to build a restaurant while you have only expenses, and you promise someone who is ready to give you money not that you will return it within a certain period (you cannot make such a commitment, because there is no certainty), you immediately give the investor a share in the ownership of this business.

Often investors who are ready to give money to a business that has not yet been built try to reduce their risks and organize mentoring programs and incubators so that early-stage companies that have passed the competitive selection can learn how to do business from the mentors that the fund has collected for them. lending funds. So, an investor shares not only money, but also expertise in the industry, he increases the chances that your company will grow, and he will become a co-owner of a large and successful business.

Returning to the question of the dangers of taking money to start your business - you can only answer this question for yourself. Absolutely every company that exists in the economy at some stage was built on borrowed funds, because their founder believed that he could build something more. This is how entrepreneurship works and this is how the economy works. The business is built on the founder's belief in his own strength, willingness to take risks and willingness to work hard and overcome difficulties. The bank cannot decide for you whether it is dangerous for you personally to engage in business. Only you can decide this for yourself.

Most people who want to start their own business in our time are faced with a problem - where to get start-up capital and the first thought that comes to their mind is to take a loan.

And then there are many questions, the main of which is whether a person will be able to repay this loan and whether it will be beneficial to him at all. People are well aware that accreditation is considered a powerful tool when starting any business idea, but on the other hand, it has a certain risk.

The business loan itself has never been a problem.

If there is a competent business plan , a good idea , then any investments are compensated by the income of the established enterprise. The main point of investing money is in their proper distribution.

Picture from the site: izhlife.ru

People who think that, having taken a loan of five million rubles, they will immediately open an enterprise that brings them income, which is enough to repay the loan, they are very much mistaken.

If a person competently set about starting his idea, then in 98% it will not burn out, and certainly will not incur losses.

Banks are now quite willing to issue loans for business development.

Many programs for the accreditation of legal entities allow people to choose quite loyal conditions, such that a novice entrepreneur would not suffer a headache every day from where he can get money for the next loan installment.

Refinancing programs now highly developed , and in a difficult moment they allow you to correct the situation, and maybe even rise to a new level in your business.

Almost every company currently uses loans. Not because it is easier for them to give back the amounts they take.

Credit- this is money that can always be put into additional circulation and benefit from it.

The same thing happens when starting a business idea. A loan is taken, repaid over time, but the business has already been launched and brings a stable income.

Another huge benefit of a loan is it is the stimulation of a business idea . Having taken not his own money to start an idea, a person begins to think in a completely different way.

No one wants to give this money out of their own pocket in case of failure, so the desire to develop a business and make it profitable increases.

Many businessmen say: "Business must be opened with other people's money." Starting your business in this way, a person makes a promise to himself to complete what he started.

No one promises that everything will go smoothly with such a business start, but people begin to treat their business in a different way.

Image from the site: rosbank.ru

You can always start somewhere small . Since it does not require large investments. This can also reduce the risk, at least in the sense that the amount that a novice entrepreneur takes will not become fatal in case of failure.

Even if we consider the option that something did not work out for a person and he still burned out, then the experience gained at the next start will become invaluable for him.

All "underwater rocks" it will never be possible to foresee, for that it is a business, but every novice businessman can reduce risks to a minimum.

Even when issuing a loan for business development, the bank automatically offers insurance, which is also a certain protective system for beginners.

The bank also takes risks when issuing a loan, and also tries to minimize the risk, because the bank is also someone's business.

Is it worth taking a loan to start and develop a business?

Yes, of course it's worth it! You can think of a refrigerator and a car, but definitely a business. This is a chance that life will change for the better, and this is what every self-respecting person wants.

Yes, there is a risk, yes, something may not work out at first, there is even the option that at some point you will have to take out a loan again during the loan, but it's worth it.

His own business, this is his own business, and in it each person is left to himself. It is a personal income not dependent on anyone but yourself. Everyone starting something new always takes risks, it doesn’t work out differently.

In conclusion, we also recommend watching the video - “How to get a loan to open and develop a small business”?

Should I take a loan for business development? This question puzzles many entrepreneurs. On the one hand, we understand with our heads that in business you need to be able to use other people's money and other people's time. On the other hand, we know for sure that it is very difficult to get a loan for business development - many banks do not even want to hear about individual entrepreneurs as borrowers. Well, besides, it is reliably known that taking a loan for business development is a super-risk event. Especially if you decide to take a loan to start a business. I think it is tantamount to disaster.

But let's weigh the pros and cons.

Benefits of a business development loan:
1. You can speed up your projects and business processes, solve problems quickly by flooding them with money;
2. Can close urgent needs in almost a few days;
3. There is an opportunity to buy valuable assets, close the cash gap, provide the company with an overdraft.

Cons of a loan:
1. Aggravate your erroneous decisions;
2. You will need to pay interest and commissions around 30% per annum;
3. In the event of a crisis, you are bankrupt;
4. You will lose time opening and maintaining a credit line;
5. Entrepreneurs such as Oleg Tinkov and Henry Ford;

You may not wait for a crisis, but you may well face a seasonal downturn in your business or some unforeseen circumstances.

The burden of credit is unpleasant and very dangerous in inexperienced hands. On the other hand, one cannot say that credit is an unambiguous evil. It is a tool that can be used for both good and bad. The general rule is this - you need to take a loan only to buy assets that are rising in price. Taking out loans to get a rapidly depreciating vehicle is most likely not the most sensible idea.

What conclusions can be drawn?

1. An entrepreneur can take a loan, but its size should not exceed its turnover for the quarter;
2. You can take a loan, but only for an existing business with a profit, and not for a start-up (opening a new business);
3. It is better to go without borrowed funds, if possible.

It must be admitted that banks are very meticulously studying their customers before giving them money in their hands. But no one has canceled your head either!

Do you also want to start your own business? Yes, you can start earning right now. What do you have for this? A great desire and ideas are already excellent. But the main thing that is now needed to start your own business is the availability of start-up capital. What to do if the required amount is not available?

Where to get money for business?

The easiest way to get money is to take a pledge to develop a small business. But, if you think about it, then this method is the most risky for a young entrepreneur.

Should I take other people's money?

One thing you must realize now is that the money you are borrowing is someone else's. You get them only for a certain time, and you will have to return them very soon, in about a month, and don’t forget about the percentage. But not everyone can get a loan.

Yes? And what is needed for this?

In order for the bank employees to believe you and immediately issue business start up loan, you must have just a perfect credit history. This means one thing: in the past, you took out loans and did not overdue a single one.

Do you need a deposit?

In order for the bank to approve your application, they will need high liquidity collateral.

What it is? Can you explain?

Yes! You may have property whose value will fully cover the amount of the loan, including interest. Do you have something like this?

If you have a highly valued property that you can quickly sell if needed, you can get a loan to support your business. See, risk again!

But, even if you have all the factors listed above in order, you still may not get such support for your business as a loan! And you will have to think again where to get money for business.

Why is this happening?

The bank will immediately evaluate your business: if you have just started and it is less than three months old, then it is considered risky. Even if you have a detailed business plan with you, where everything is exactly written, a plan that promises success and development, prosperity, this still may not convince the bankers to give you business start up loan. Young businesses are always valued at 100% risk of loss.

Do I need to take out a loan at all?

If you dream of owning your own business and do not know where to get money for a business, then you can take a loan secured by your own property. But here you have to think carefully! Be warned: your loan payments will make up the bulk of your income.

Any experienced banker knows that it takes 12 years for any capital-intensive project to pay off. Therefore, you must first weigh all the pros and cons, calculate your strengths and capabilities, and then decide whether you need business start up loan, or not!

In conclusion, I would like to say:

• Take a loan if you are confident in your financial capabilities. Think carefully before making such a decision! This will save you from making hasty decisions.
• If you think you have great ideas, the firm will thrive, and credit will be nothing to you, then don't rush. First, consider all the features of your business, so as not to immediately get into debt!
• The business world is cruel. But your business will help you unwind and not work for "someone else's uncle." Remember this always. Maybe this will push you to a quick and efficient solution to your problems?

Yes! A loan to start a business is a good thing, but we believe that you will be able to calculate your strength!

Almost any novice entrepreneur asks the question: “Is it worth taking business start up loan? On the one hand, a loan allows you to quickly develop your business, and on the other hand, it must be repaid, and even with considerable interest. In this article, I will allow myself to express my point of view on this problem, since I happened to take a loan in the amount of two million rubles for a business from scratch and repay it within four and a half years. Those were tough times, let me tell you. So let's go.

Why do people want to take out a loan to start a business?

Because, by inexperience, this seems to be the simplest solution to the problem. Let money make money. How many times have I heard from my friends: “Give me five million, and I will open a beauty salon”, or “You need money, you can’t open a business without them”, etc. People think that the only problem is the lack of money. What is their surprise when they receive this money? - There are much more problems, because they have never managed such capital.

Can the risks be reduced?

Yes, this is a must. Alternatively, start small.

Example

With no experience in retail, I opened a small educational toy store in my hometown of 270,000 people. I took out a loan of 300,000 rubles for this. At the same time, I understood that, in the event of a complete failure, I could earn this money for hire within a year. Then, having worked in this store myself as a salesman-loader-director for several months, I realized how much profit I could expect. After that, I decided to open a network of such stores, and gradually took out a loan for four more outlets.

Conclusion

If you have the opportunity to conduct a niche test on small investments, then by all means do it. Do not take a large amount at once. Let everything be embodied not as perfectly as you would like, but in this way you will avoid the risk of remaining in debt for many years.

Does everything depend on you?

In most cases, yes. But do not forget about the objective features of the market, which you cannot influence.

Example

And now I'm happy within six months became the owner of four stores. Somewhere already looms fifth. And there are already ten plans. The idea is approximately the following: in a couple of years I will set everything up, then in three years I will pay off the loans, and then I will “cut coupons”, as they say in the common people. But it was not there. Suddenly, out of nowhere, in our city, many large shopping centers begin to be built. And they grow quickly - like mushrooms after rain. And rent in them costs space money - almost like in the capital. There is a twofold situation: either you open in a new shopping center, or your competitor, or federal chains (which are extremely difficult to fight). To open a new retail outlet, of course, you need to re-credit. Because of this, there is no end in sight...

Conclusion

I hope you get the point: it is necessary, if possible, to assess the risks, but you can still “fly”. And this may not be your fault. In my case, the situation in the retail market of our city just happened. It's good that I saw this trend in advance (about a couple of years), which allowed me to stop the growth in the number of outlets by five, and then gradually exit this business. At the same time, I paid off the loan in full and managed to earn money. But it was not easy for me, friends. If you are wondering how to exit the retail business, I will write a separate article on this topic.

What should you be prepared for if you still decide to take a loan to start a business?

The burden of financial obligations does not pass without a trace - I have perfectly verified this for myself. Most likely, you will have to pay for a quick start in business with the following:

• you will sleep worse
• you will have to work much more than usual
• you will become more irritable with contractors, staff and loved ones
• the development of personal life will fade into the background
• sometimes hands down
• you will get sick more often due to stress
• you will not be able to exit the business until you close the loan, and other "charms"

And the worst thing is that the business may not take off. Several of my friends were in this situation. I certainly don't want this for you.

So think carefully about whether you need it. I'm not trying to scare you somehow, but I'm only writing about what I went through myself. Of course, it was a good experience, but looking back, I strongly do not recommend that you take business start up loan. Especially in our country, where crises happen regularly, and the percentages are simply wild. And recently, a law on bankruptcy of individuals was also adopted.

I agree, it’s hard to resist when banks from all sides directly “push” you: “Well, take it, please!” The whole country has already been addicted to loans.

Is it possible to do without a loan?

Yes, and even necessary! About, how to open your own business, I wrote .

• Start small, don't risk big investments. Yes, development will take much longer, but if you try, you will succeed. Business does not like haste.
• If you cannot do without serious initial investments, then it is better to take an investor, not a loan. The investor must understand what the risk is.
• You can also borrow money from close relatives. However, remember: opening a business, but not repaying a debt to a loved one and ruining a relationship with him because of this relationship is a bad exchange.

All horror stories are over. 🙂 I wish you success! If you still decide that you can’t do without a loan, then read our “How to get a loan for a business from scratch, so you don’t regret it later.”