How to Borrow as a New Entrepreneur
Everyone knows that you have to spend money to make money. But what if you have the idea, but not the money to invest in the first place? In this situation, there’s nothing to worry about, as it’s a situation that most successful entrepreneurs will have found themselves in at the beginning of their careers.
So, with no money to invest, you will need to look to borrow the necessary funds to get your new venture off the ground. But how should you go about it? Here we take a look at how you can get your business on the path to success, potentially creating an operation as successful as Lloyds in the process.
Ask for advice
Many financial institutions that you’ll end up contacting will be happy to give you advice concerning how you borrow. There are many organisations that have years of experience when it comes to advising small and new businesses on how to fund themselves, and the information they provide could be invaluable. Consequently, it’s important that you don’t hesitate in asking for additional information or advice from an industry expert.
Setting up a meeting with someone that knows what they are doing, even if it is just to make enquiries, can be incredibly helpful in the long run.
Make sure everything is put in writing
Whether you’re borrowing from a bank or any other form of lender, it is incredibly important that any transaction is put into writing and made legally binding. This not only means that you’ll be legally required to repay the money in agreement with the terms of your deal, but that there will be no issues of miscommunication or misunderstanding.
Be sure that all the details of the agreement are noted, including the rate of interest and exactly how repayments will be made and how long the repayment period will last for.
Explore your options
There are an incredible number of ways in which you can borrow money and you shouldn’t just limit yourself to the banking sector. In recent years, there has been a definite trend towards peer to peer lending amongst small businesses, and this may be an option you could consider.
Alternatively, finding individual investors may be preferable to borrowing from a bank. All of these options have their advantages and disadvantages, and each should be weighed carefully against the others. Take the opportunity to make sure you understand them all and how they may benefit you as an entrepreneur.
Plan your pitch carefully
Borrowing money for your new business will be so much easier if you have absolutely everything planned out and can give detailed information on exactly how the borrowed money will be spent, why you need it and how you will repay it. Installing confidence in a lender is essential and, unless you can prove that you know exactly how to use the funds, you are going to struggle to secure investment.
Borrowing is about showing that you don’t present a risk to the lender and his money – the best way of doing this is with a detailed plan!