3 Things To Discuss With Your Business Partner Before A Loan
Starting a business is one of the best ways to build wealth. You can do it on your own, but sometimes it’s easier and less of a struggle when you have a business partner. If you’re still starting out, the first thing you and your partner may have in mind is where to get capital.
You may be thinking of taking out a business loan from an authorised money lender. While this is a quick and easy way of getting the funds you need, don’t make that decision hastily. Ask yourselves these questions first before taking out the loan.
How profitable will the business be?
This is one of the most important considerations in business, whether you want to take out a loan or not. If your business idea is not profitable, you may want to consider a different business.
When you and your business partner are deciding to take out a loan, profitability becomes even more important. You will use the income from your business to pay off the loan. You must consider, then, if the projected monthly revenue will be enough to cover both business expenses and monthly loan repayments.
If you have to shell out your own money to repay the loan, it’s not worth it. Either you or your business will go bankrupt easily this way. If the business will not be profitable enough, think twice before taking out a loan. Talk about it with your business partner as well.
How long will the business last?
Longevity is another concern for any business person. Will your business still exist in the next 5 to 10 years? If your projections clearly indicate that your business will be profitable and will last long, then taking out a loan is all right.
But if the business is more unpredictable, and you think it will not last very long, reconsider taking out a loan. Discuss with your business partner how long you expect the business to last, and if it’s worth the effort to take out a loan.
Long-lasting businesses are more likely to pay off their loans and succeed. They stand to make even more money once they have fully repaid their loans.
Are there other sources of funds aside from loans?
Loans are not the only way you can fund your business idea. Talk with your business partner and see if you can seek out investors. These can range from friends and family to venture capitalists with deep pockets.
If you can find investors for your business, then all the better. When investors pool money into your business, you have no liability to pay them back if ever your business does not work out. Investors take the risk along with you.
But when investors agree to pour money into your business, be prepared to give up some ownership. Venture capitalists and other big-ticket investors usually ask for a percentage in equity shares in exchange for their money. This means they will become part owners of your business, and they will take a share of the profits.
Conclusion
If you and your business partner are looking for ways to fund your business idea, consider these three questions first before taking out a loan. Be wise before making a decision. That way, in the event your business does not take off, you will not find yourself having to pay back a loan that was not planned well enough.
Once you’ve decided, choose a legitimate and client-friendly lender like R2D Credit or other reputable lenders. They will help you get your business idea off the ground.
