Can Your Startup Survive Without Loans?

What is a start-up?

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This is a newly formed company whose product features aim to satisfy particular market niche. Startup companies usually require a lot of capital which will be used to fund for their marketing, rent for the office space, staff, product development and other expenses. Online personal loans is one way of raising funds for start-ups.

Challenges faced by startups

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1. Marketing

   – getting funds to market your new business can be very hard. You must ensure that your brand is out there, which in return will bring traffic to your company and ensure you receive maximum returns. Most times you will end up doing the marketing activities by yourself.

2. Hiring people

   – finding the right staff to help you drive your startup where you want it can be a daunting task and the longer you take the more time gets lost.

3. Customer loyalty

   – getting a satisfied customer is key to obtaining customer loyalty. Once you have satisfied customers, startups can escalate towards achieving their vision/ mission successfully.

Getting funds for your business can be hard. Below are some of the pros and cons of taking up a loan.

Advantages of start-up loans

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1. Start-up loans help you cover most of the costs that one must incur when starting up a business. For instance, in the restaurant, manufacturing, or retail industry, you will need to factor inventory costs into your initial startup budget since your inventory is necessary to operate from day one. Similarly, electricity, gas, water, phone, internet, and other utilities are essential to your commercial office’s operations, so you would need funds to cover these expenses as well. Insurance, office supplies, advertising, and equipment fees incur other costs when starting your company. Fortunately, lenders like Plenti offer outstanding personal loans with flexible repayment terms to match your budget, so you can take these loans to fund startup expenses.
2. If given the loan an amount of tax may be exempted from your payment where you will enjoy relief from tax
3. If you get the loan from a bank, they will only ask for the interest you had agreed to pay and loan payment instalments as compared to getting it from an investor who will require a share of your company which will grant him decision making benefits.
4. Depending on who you borrow your money from, you may be able to retain a larger amount of profit as the interest rate goes down .You will pay lower interest rates when the lender is your friend compared to having a commercial lender.

Disadvantages of start-up loans

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1. You will own less and less of your company if the returns are not promising.
2. It is very difficult for a startup company to be given a loan as most agencies and banks usually give priority to existing businesses as they are in a better position to offer collateral. If you decide to apply for unsecured business loans you will be subjected to high interest rates.
3. Should your business fail, you will be at risk of losing either your property i.e (title deed) or whichever form of collateral you had given to the lender
4. The application process especially from a bank can be very lengthy as it requires a lot of paperwork and verification of your credentials as they also need to assess whether or not you are viable for a loan.
5. Some banks have irregular payment amount, which may be brought up by varying market conditions, thus making it challenging for the borrower to make accurate financial plans

The verdict

Depending on where you want to get your loan, every lender has their own pros and cons. First do your research and explore the different places that are available to offer loans to start-ups, weigh the advantages / disadvantages for all, then decide whether or not you will take up a loan.