Despite what many people would have you believe, running a startup relies on money. At least, it does if you want to see success. There are posts galore out there about how to start a business for less than $1000, and they aren’t all rubbish. But, few of them stand to earn you big bucks.
In truth, you need to spend to see money back. And, that leads many small business start-ups to reach for bank loans and other funding support. Lucky for us, there’s plenty of support out there for those with decent business plans. In fact, banks are often more willing to lend to entrepreneurs, as they can be more confident of a return. But, if you’re embarking on a new project, it’s possible a bank loan isn’t right for you. Instead of settling for this without thinking things through, consider these three reasons to keep the bank at bay.
You’d need to pay back fast
Repayment rates vary depending on the size of your loan. But, in most cases, a bank loan will require monthly repayments. And, when starting a new business, it might not always be possible to see a profit quite that fast. The trouble is, of course, that the longer you take to pay that loan back, the more interest you’ll pay. By the time you start to turn that profit, your loan could well have doubled in value. And, that could see you in the red for a lot longer than you would have been otherwise.
Your credit rating could suffer
Down the line, any loans you take out will be against your business, and your credit won’t be affected. But, in those early days, your business can’t prove itself either way. As such, it’s likely that loan will be dependent on your credit. This means that, if you can’t pay it back, your credit rating will take a massive hit. And, that could leave you in even more trouble that you could imagine. With bad credit, you’ll struggle to do anything which involves money. That includes buying a house or taking out a credit card. And, you might want to do all those things down the line.
Alternative options might suit you better
It’s also naive assume that a bank loan is your only option open. There are also possibilities such as Crowdfunding. This is used by many young entrepreneurs now, and involves asking for investment from supporters in return for rewards. Equally, sites like Peerform allow you to borrow money from your peers. If uncertain about how this would work, you could check out a Peerform review or two to get your head around things. While not dissimilar to a bank loan, an option like this won’t damage your credit. It also allows you to postpone payments when necessary.
The moral of this story is, of course, to take your time before jumping into anything. Research your options and know your needs to ensure a bank loan doesn’t leave you broke.