Hello friends, happy second weekend of June, 2020. I'm so excited that we've made the most of these times to learn how to raise funds for our business and I'll be glad to see many leverage the bootstrapping, bartering and the TTP Code techniques we've so far covered to have their entrepreneurial ideas funded. For a truth, finances is not the entrepreneur's problem, all he needs is the right knowledge, people and strategy.
Let's take a look one critical module of fundraising for business - "borrowing". This is one controversial option as many are of the opinion that start-ups should never go near this option. However, I'll say "caution" is needed for borrowing when the right idea and business strategy has been pitched by the entrepreneur.
The emphasis of this discussion would be the "Caution Tips for Business Finance Borrowing". This should firm a guide when borrowing is the last option the entrepreneur has.
Note that we all borrow from others - Other People's Money (OPM), Other People's knowledge (OPK), and Other People's Experience (OPE). All three are significant in business success.
Summarized below are a few tips we need when borrowing becomes as option for our business funding. I had at some time borrowed money to finance my projects, I have also been around some entrepreneurs who borrowed. This is a summation of the lessons drawn form finance borrowing:
- Go to friends and family before you go to the bank. Choosing this class of lenders would reduce the tendencies of being hurt should the investment fail.
- Spread the risk. Don't borrow from one source. Instead of getting 1 million from one source, go for 200,000 from 5 sources.
- Create a solid plan before going to borrow. As earlier said, every business man or entrepreneur must draw a solid financing strategy for his business.
- Anticipate the Unexpected and make provisions for contingencies. This means get 550k for a budget of 500k incase of inflation, price hikes which might crumble the startoff.
- Start small and grow big. Every entrepreneur must know he value of organic growth in business. Get the long term mentality. One of my mentors say "Don't start so big that you lose tough of the grout".
- Seek expert advise - This is where to draw wisdom from.
- Develop a plan B (Answer the "What if" questions). This is your own personal pan different from what you had earlier showed investors.
- Develop a plan C. This is your repayment plan. Like an instalment plan. This should be adopted only if plans A and B fails.
- Develop a plan D. This is your failure plan. This should e adopted only if A, B and C fails.
Funnily, borrowing cannot be taken away from finance, that is why we are having the emergence of Decentralized Financing (DeFi) within the blockchain space. However, every investor must gather sufficient information to guide such decisions, just as needed for other business funding options so as to avoid regrets.
I would be glad to share thoughts with you on this subject. Let's maximize the comments section of this blog post.
Very good your recommendation dear friend, the loans to tell the truth for me are a double-edged sword, why? because one never knows what can happen, as well as the business can go well may go wrong, and then we are left with a debt that many times we can not pay. That's why I think your plans are very pertinent, you must always have a beam up your sleeve, we can't just have one option, we must have many! Greetings!
That was a solid addition. Thanks!
Very nice content for new entrepreneur!
Thanks for reading through.
Great and very useful recommendations, @uyobong.
Hi @uyobong I like what you say
Another thing is the cost of borrowing and the cost of default and off-course the need to understand the collateral that one needs to pay while buying from a financial institution
That's very true to seek help from our loved ones before we head out to banks and financial institutions to get loan. Thanks for this great post in PH @uyobong
Thank you very much for the engagement.