Starting a business with no debt is like landing on the moon in a homemade rocket: Not very feasible.
As our friends at Direct Capital like to note, no business survives without a loan at some point. Financing can solve a lot of problems for your small business. Starting up a business with loans, however, ensures that you’re in debt from the start. That isn’t the way anyone wants to get into business for the first time.
Given how difficult it is to start a business with your own money, you may be tempted to think of a startup loan as an inevitably. You shouldn’t.
Ami Kassar at You’re The Boss takes a closer look at one business that got off the ground using only its owners’ money. With startup costs of $35,000, Evil Genius Beer Company split those costs between their three owners. They’re now a growing (and tasty!) brewery that doesn’t have to worry about paying back a major loan to get them started.
It may take multiple owners. It may take saving a couple of years more than you’d like to in order to get it started. It certainly is not the right fit for every business. There are two major advantages to using your own money, however.
- You’re not on the hook for debt to start off. Even after your business kicks off, you’ll likely find unexpected expenses that you need to address. If you’ve already taken on a loan, addressing those concerns with further loans will leave you deeply in debt at a time when you really need financial flexibility.
- You answer to no one. You don’t have to worry about scheduling payments, telling the bank or lender what you’re doing with your money or taking reasonable risks you believe are necessary for the business. That affords you not just financial flexibillity, but needed small business flexibility.
It may be safer to go for a loan to get your business started, but there are very real benefits to not doing so. Perhaps you should be an Evil Genius, too.
How did your business gets its start?
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