Is it Better to Borrow or Give Equity to Grow?

starting a businessWhen starting a business, most of the startup costs will be paid by the business owner from savings, retirement accounts, long hours, and hard work. Banks will not lend to start-ups, and those who will do so at incomprehensible rates, and investors will not give money to an unproven business owner. But at some point, after the first few bumpy years have passed, those businesses which succeed will have to make a decision on how to grow. They can continue to self-fund their growth, accelerating only as fast as their profits will let them, or the can look for cash from a third party to help offset costs to expand. For those businesses which go with the second option, there are two primary ways to do this: with debt, or equity.

Taking on debt through borrowing can be a great option for some companies. The owners do not have to give up any ownership, meaning long-term profits should be higher. And depending on the amount borrowed, the debt could be gone in a matter of years, after which profitability increases. Borrowing is usually a good option if you know exactly what you need to expand, or if you are using the funds to buy a piece of equipment or a building, as you will usually get better rates. On the flip side, most lenders will require you to sign a personal guarantee, meaning you are on the hook for the total cost of the loans, even if the business fails. …

Welcome to Business Essentials

Here we go, on a journey which will take us to may different areas, first we start with the basics and then move on to the fun stuff. Business Essentials is a group discussion on the fundamentals of basic business, we meet here on a daily basis to discuss the lighter side of business and the simple things it takes to get ahead. In today’s world what I’ve noticed most is we make things too complicated for what the real need is.

I would like to discuss ideas to keep it simple and excel in business, just the essentials!