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Home 2018-07-27T17:49:05+00:00

One of the major reasons preventing people from starting their businesses is lack of capital. That’s why more entrepreneurs are relying on financial institutions, angel investors and venture capitalists to fund their new businesses. However, it’s a daunting task to get funding from these individuals and institutions because you’ll need to provide a professional and compelling online business plan. These institutions and investors will then take the time to authentic your information, including your background. The whole process can take a lot of time; which is why most new business owners resort to funding their businesses with their savings. If this sentence describes you, here are the advantages and disadvantages of funding your business with your own money:

Advantages

Most people who start a business with their own money always succeed

Take this scenario: You’ve worked for years and saved some money, and now you’ve decided to use that money to start a business. Because your hard earned cash in on the line, you’re going to look at your new business in a different angle. You are going to conduct extensive research to know the viability of the business to ensure the risk of losing the money is significantly low. You’re going to draw a meticulous plan, and this will ensure you run a business the right way. When you succeed, you’ll enjoy all the profits, not the lending institution or individual investor.

Most people who start a business with their own money always succeed

Many people today choose to finance their businesses with their money because of complete autonomy. When a bank, for example, funds your business venture, they will be calling the shots. They will even dictate how you should run your business. Even without being involved directly, the amount you have to pay every month will make you a slave of the bank, because the repercussions of defaulting on the loan are severe.

Disadvantages

It’s risky to start a business with your own money because of debt and bankruptcy

Many people think that when someone decides to fund their business, they get the money from their retirement accounts or other personal savings accounts. They can also get the funds from credit cards, or line of credits. That’s where most business people get themselves in trouble. Many small business owners today are using their credit cards or lines of credit to take out loans to finance their businesses. For example, if a prospective business owner takes a line of credit for their new business through the bank, the bank will require that they guarantee the money. If the new business fails to take off, the owner will spend the next 10 or so years of their life repaying the loan. If they can’t, they will be compelled to file the personal bankruptcy. Filing for bankruptcy is the worst nightmare for any entrepreneur.

You may not have sufficient cash to start a business

Most entrepreneurs who use their own money to finance their businesses succeed. However, the problem comes when a customer or an institution places a huge order. You have to prepare that order and deliver it. Not only that, you will have to wait for at least three months to get paid. That can become a pain in the neck for your small business. Because your capital is not enough, you will have no option but to cancel the order. And that’s how such business owners miss out on opportunities to scale their businesses.

Conclusion

These advantages and disadvantages should serve as a guide to choosing between financing your startup with your own money or taking out a loan from a bank to finance the business for sale miami. Regardless of the option you choose, you should make strategic policies and have some financial knowledge to succeed as an entrepreneur.

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