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Would You Ever Recommend Starting A Business On Loan?

A lot of people start up their businesses on borrowed money. I've never really understood this though, it seems like a really risky strategy. Have you done it, and if so, did it work out how you intended in the end with this site?
 
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Lenny

Well-known member
SUPER Site Supporter
If you do, I suggest researching the need for the product, location and other factors.
 

mla2ofus

Well-known member
GOLD Site Supporter
Lenny's right. It's like taking out a 6 figure student loan and getting a degree in a field that has very little employment opportunities.
 

Lenny

Well-known member
SUPER Site Supporter
Lenny's right. It's like taking out a 6 figure student loan and getting a degree in a field that has very little employment opportunities.
Yes, and that is why banks that loan money for businesses investigate the value of loans and rates of success. The same should be done for superfluous college degrees.
 

Doc

Administrator
Staff member
Any bank lending money on a new business venture require the borrower to have skin in the game. Borrower will have to put up a good portion of the cash or put up some collateral that will secure the loan if the business fails. You would also need a thorough business plan showing how you expect to make money so that you can pay back the loan.
I would guess most businesses are started with a mixture of assets of the borrower and money from the bank.
 

FrancSevin

Proudly Deplorable
GOLD Site Supporter
Any bank lending money on a new business venture require the borrower to have skin in the game. Borrower will have to put up a good portion of the cash or put up some collateral that will secure the loan if the business fails. You would also need a thorough business plan showing how you expect to make money so that you can pay back the loan.
I would guess most businesses are started with a mixture of assets of the borrower and money from the bank.
You nailed it. If the business cannot open on your own dime, then perhaps you should wait until it can. And of course, check your premise.

WILL IT SUCCEED without the loan?

The answer to the OP's question is yes with the qualification that the loan is added to the startup funding to magnify the size of success and reduce the time in getting there. Think of it as fertilizer. If your ground is not fecund enough for sucess without it, don't spend the bank's money, and your credit, on fertilizer.

One more warning. if you involve a bank, you have a new partner. One who may have different ideas about how your business, YOUR DREAM BABY, should be run.
 

bczoom

Super Moderator
Staff member
GOLD Site Supporter
Many go to a venture capitalist to get money for a start-up. You'll need a sound business plan and prepare to have a partner.
I started with a very small company who borrowed $10M. Three years later, the company was sold for $80M. All the owners made out.
 

Ceizad

New member
Yes, For the one benefit. For a business startup, you do not have to spend your half-life to save money on the job.
 

FrancSevin

Proudly Deplorable
GOLD Site Supporter
I started my first business in 1985 with a cellphone and a credit card.

Shut it down and reorganized, switching from Packaging Machine Design & install, to Contract Packaging in 1990.

We sold it years later via leveraged buy-out, but the new owners ran it into the ground.
Leaving me and Cathy bankrupt.

We started it over with a cell phone, a good reputation and a Prepaid credit card.

We restructured and used credit to buy new equipment. Financed them by a local bank on a handshake. The bank later sold out and the new owners called the loan. We did survive but,,,;

Never again.

Other people's money means you are not your own boss. Partners means you are not your own boss.

I'm not saying don't borrow money or have partners. Just advising some of the risks and what you lose when you do.

What we have now is ours. We answer only to our client base and our own honor.
 
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