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.
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.