Ways & How

how to borrow money to start a business

how to borrow money to start a business

Money, as capital, is usually the prime consideration when planning to open a new business. Many wonder how to borrow money to start a business because not everyone has the necessary cash in their pockets. Obviously, without the initial capital to start a business, the plan will lie dormant in the ground. For it to sprout, money is necessary, and eventually, the business can grow and become financially stable. When thinking of ways to secure capital, what usually comes into mind is either borrowing from banks in a form of loan secured by collateral, such as property, or borrowing from financial institutions other than banks, which usually comes with high interest rates. Some may also resort to friends and close family members. Whatever the source, getting the necessary financial capital to begin a business must be carefully thought out. Here are some ideas concerning starting a business and borrowing money to do so.

  1. Believe that you can do it. Be positive and believe that your goal to start a business can become a reality.

    Conduct a feasibility study. Consider whether your proposed business is economically viable. Think of the location, possible market, the volume of your clientele, and most importantly the availability of the people that will help you run the business. They are not to be considered as mere employees but business associates. With a good feasibility study, you can create a realistic business plan.

  2. Prepare a realistic business plan or proposal. When borrowing money, especially from banks, you must persuade the bank authorities to believe in your idea to borrow the needed funds. A good business proposal must cover all possible crises scenarios that the business may encounter in the process and have the necessary remedies to address the impact of such problems. Doing so can convince a bank of your ability to pay and remain profitable in the midst of crisis.

  3. Firmly state the range of the amount needed to start your business. Always make sure that what you ask for is enough to start the business. The amount must also cover potential problems and setbacks.

  4. Agree on the interest rate, mode of payment, and suggest a long-term payment period. Be sure that all three factors are clearly spelled out.

  5. Have an alternative solution in case that cash flow is not enough to pay your debt obligation. Having an alternative source to pay your debt will boost your confidence and ability to pay. When the financial institution is secure and confident in your business plan or proposal, there is no reason why your proposal would not be accepted.

  6. Any oral agreement must be put into writing, and both parties must comply with the terms of the agreement in good faith. The parties involved should sign the agreement. Even if the source of funds comes from a family member, close relative, or friend, all agreements must be put into writing, and the terms must be clear. Lastly, both parties must have an additional security and confidence that should there be any problem in the process, they can enforce the agreement in a court of law.

The points listed above can help anyone who needs to learn how to borrow money to start a business. They can help you secure the necessary capital to start a business.  


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