FOOD FOR THOUGHT

Most successful business owners wouldn’t be where they are today without having borrowed money at some point throughout their journey. Loans often give entrepreneurs the financial boost they need to scale their business and reach more customers. However, for every success story there is a cautionary tale. It’s important to do your due diligence and make sure that taking on debt is the right move for you.

Most businesses require at least some external finance to grow, and this is usually obtained from banks in the form of a business loan. While every bank is slightly different and has unique terms and conditions, there are generally two key things that almost every bank or lender will consider before they approve finance.

You may be asking yourself: “how much is enough?” However, this is probably the wrong question. It’s too open-ended; ‘enough’ is such a subjective term. So we ask our clients a different question altogether: “have you invested as much as you can?”

Most venture capitalists and angel investors will expect a minimum of 30% before they even consider investing. Anything less and they may not deem the risk of investing in your business as worthwhile. If you can only offer a low ROI, investors may be better off putting their money in the bank. We’ve outlined a few things you should keep in mind when calculating ROI.

When you’re trying to raise equity, it’s important to plan for future expansion. Potential investors will want to see that you’re in a good position to grow your business and expand into new markets. The path to expansion will look different for every business, but there are a few mainstays that apply to all industries and common mistakes to be avoided.

Taking on external finance is a necessity for most growing businesses. However, business owners should have a robust understanding of the pros and cons of external finance before entering into an agreement, and have a repayment strategy in place from the beginning.

Debt. It’s a love-hate relationship – but it is something we seem to throw ourselves, and our businesses, into headfirst. Before you take out a business loan, consider the following.