If you have a good business idea, you don’t always have the money to finance it at the same time. But money can be borrowed, which is why many founders take out a loan. In most cases, this actually makes sense, especially if the business idea is viable and the project is well thought out. However, there are other financial ways to launch a company.
Crowdfunding: a worthwhile alternative?
The other ways to fund a startup are: own funds, money from friends, crowdfunding and the entry of solvent investors who believe in the respective project. Since the digital revolution, crowdfunding in particular has been on the rise, with platforms like Kickstarter booming. However, in order to receive money there, founders must specifically inspire the masses. People want to be convinced that the planned products are useful, perhaps even indispensable. Only then will they give their (usually small) contribution. Many small contributions add up to one big one – if the founders succeed in their coup. Unfortunately, most projects go down without a sound on crowdfunding platforms.
But better to take out a loan?
If you take out a loan with a bank, you don’t have to convince and inspire umpteen people, but only one person: the financial service provider’s clerk. More and more founders, however, are deciding to take out their loan on the Internet, where somewhat different, often looser rules apply than at the house bank. On bettercompared.com, numerous providers can be found, presented in a clear form, so that interested parties can quickly compare and choose. The financial service providers are carefully checked and reputable. With just one click, visitors to the free platform can find their chosen bank and enter into negotiations with it.
This is without question the fastest and most convenient way for founders to obtain money. It is important to check in advance whether your business plan is really viable and whether the loan installments are affordable. It’s about actually being able to pay back what you’ve borrowed, including interest. And that only works if the project is well thought out and runs as desired, so that it eventually brings in good profits.
The advantages of financing by credit
There are several facts in favor of credit financing that cannot be denied. First of all, the founder does not have to give up a share to any investors; he or she retains full access to the company. Moreover, the business plan can always be adjusted over time, because things never work out exactly as the young entrepreneur envisions them at the beginning. That doesn’t have to be a bad thing at all, because in many cases things actually turn out better than planned! In addition, an official bank loan can also be used to bring investors on board at a later date. They are more likely to be convinced of the viability of a project if they see that there is already money behind it. In addition, the first successes may already be visible at this point in time, making it tempting to enter the business.
Important tips for taking out a loan
Before borrowing, the founder should be very clear about how much money is needed. To do this, it is necessary to calculate exactly the start-up costs of the project, from possible rent, raw materials, tools, machinery, company vehicles, to employees and so on. The best way to do this is to make a list, and over a period of several days, to get to the bottom of the question as deeply as possible. Nothing should fall under the table or be underestimated.
Who is not clear about the respective sums, asks preferably with entrepreneurs in the circle of acquaintances, which costs are to be estimated for the individual positions. If nothing can be found out in this way, the Internet will certainly help. The list should be as realistic as possible so that there is no sudden financial gap or the loan is too large. It is a good idea to contrast this calculation with the expected revenue. This gives a balanced picture that hopefully reflects the actual situation and thus serves as a basis for the credit decision.
