Is it advisable to procure a debt to start up a new business?

[btaliat]

Borrowing to start a business is not a problem. In fact, it is handful of business owners that don't borrow to run buinsess. Even borrowing will let the business owner keep to toe. He won't mismanage the money because he will always remember he has debt to pay.

 

[BrolySSJ]

Yes, like you pointed out, I see too many risks here, that's why I'm concerned about it. But he doesn't seem to care. He is too optimistic for his own good, no proper plan ,no back up plan, nothing at all. Who does that? Definitely not someone as careless as him.

I think that being optimistic and being reckless and careless are two different things and from what you have described in this scenario without having a back up plan and without having a business plan as well this is likely to be considered to be more of a reckless act and is not the recipe for success in my opinion. By the way how is he putting up the collateral for the loan? What is he taking the loan against?

 

[Jonaville1]

I think that being optimistic and being reckless and careless are two different things and from what you have described in this scenario without having a back up plan and without having a business plan as well this is likely to be considered to be more of a reckless act and is not the recipe for success in my opinion. By the way how is he putting up the collateral for the loan? What is he taking the loan against?

Yes you are correct, he is being reckless. As for the loan, he used a piece of land he inherited as collateral, he was also required to provide a guarantor, and he chose his mom for that. The loan is still being processed, he can back out now which is why I'm trying to talk sense into him. A landed property is on the line here, not to mention the problems his mom will face if things go south.

 

[MarieArie]

I have someone who is interested in the sale of clothes, but he doesn't have any start up capital. He intends to get a loan to get his business rolling, and he seems so sure about repaying it back on time. But I have a bad feeling about this. Is it really wise to go into debt to do business you are just venturing into? I'm not trying to be pessimistic here, but what if the turn up is lower than what he expected? I tried to talk to him about it but he just shrugged it off as no big deal.
Should I leave him to go on with his plan or try to dissuade him?

Every business needs a start up capital. If you don't have a capital yourself and you can see your vision beautifully, you can get a loan to start your business and pay back quite later. Although loans can sometimes be frustrating since the interest keeps increasing daily.

 

[BrolySSJ]

@Jonaville using a piece of land as the collateral is very risky as well because it is likely that if the business had to go under then he would lose that land as well. Also putting down your parents as a guarantor is a very bad thing to do especially when you don't have the know how and the funds by which to create this business and without a plan as well because it is essentially a way in which you are alleviating yourself of the responsibility for having to deal with this as well.

 

[Life drama]

Getting or acquiring a loan to start up a buisness is not a bad idea but the problem is how ready are you to start up the buisness.there are some steps you have to take before taking a loan by yourself firstly you have to have a business plan,a good location,the required skills to start up and how do you intend to repay back the loan.

 

[Gilead]

I would never advise anyone to start up a business by
borrowing unless it's business plan is very ideal and it feasibility study is a positive one. Aside that I won't advise anyone to do such

 

[Richard92]

It is advisable if you trust the business you want to go into, knowing the business matters a lot. You must know the kind of business you are going into before you go for a loan. The business also must pay well with good profit so that you can be able to pay back the loans on time.

 

[Jonaville1]

Getting or acquiring a loan to start up a buisness is not a bad idea but the problem is how ready are you to start up the buisness.there are some steps you have to take before taking a loan by yourself firstly you have to have a business plan,a good location,the required skills to start up and how do you intend to repay back the loan.

Yes I agree with you, but the problem is this guy has not done any of those things you listed above. Okay, maybe he has the business in mind but that is just about it. He probably doesn't have a concrete plan to set in order to boost his intended business. He feels that once he starts the business everything will just fall into play. That mentality is very dangerous.

 

[kayode10]

I cannot advise you to obtain loan to start up a new business. This can very fatal as you don't have prior knowledge about the business before. If it is a business s good track record about, you can still secure the loan. Instead of trying to obtain loans, I will advise you look angel investor who can investor some fund into your business with little interest.

 

[Goodday]

I have someone who is interested in the sale of clothes, but he doesn't have any start up capital. He intends to get a loan to get his business rolling, and he seems so sure about repaying it back on time. But I have a bad feeling about this. Is it really wise to go into debt to do business you are just venturing into? I'm not trying to be pessimistic here, but what if the turn up is lower than what he expected? I tried to talk to him about it but he just shrugged it off as no big deal.
Should I leave him to go on with his plan or try to dissuade him?

Maybe the kind of loan your friend wanted will be taken into consideration. If it's loan from a family member or from one of his other trusted friends, then he can go ahead and take the debt to start the business with that support. But if the money is heavy and none of his friends or family members cannot afford that money but the only source is to take the loan from the bank, l think you should still advise him not to go for it because the business can turn him down like you said and he will be in serious problems if he can't afford to pay the loan.

 

[tuna89]

It is not advisable to procure loans to start up a business, as a starter you need to invest within your limits, you can always start small depending on the kind of business you wish to venture into. You can always balance as time goes on, make sure your financial reports are standard then you can always go for a loan, make sure it is interest free.

 

[Kamon c4]

He could get a loan if it is from family or friends and there would be no need for paying interests and where there would be flexible payment methods. In the case where this isn't available, he should avoid loans. If he does not heed your warnings, just let him be.

I agree with your point of view and I beleive loan with interest motivates loanee. The loaner only gain is the interest. Getting loans with interests to start a business is a very good move provided the loanee is determined and knowledgeable about the business

 

[Adebayonle7]

Depending on the size and type of your business, and your revenue streams, and it is certain that you can pay off the debt as soon as possible and this won't sink the business ot halt the progress of the business, or completely scatter the business plan. And all capital must not be dependent on the loan. It is safe to use it to support as you kick off.

 

[Sammyesx]

Most people are face with this issue, they want to start a business but they don't have the capital, which leaves them with one option, Seek for loan.
Getting a loan to start a business is not a bad ideal, he should make sure the business he is venturing into has the prospect of paying back the loan a the stipulated time.

 

[Donkiz]

Securing a loan from banks or financial institutions to start a new business is not advisable, because if anything goes wrong and you couldn't repay the loan, the loan interest will keep increasing the loan amount, and you will be in a very big pressure to repay the loan with the accrued interest. It's better to as for help or interest free lending from family and friends to start a new business rather than collecting loan from financial institutions.

 

[BrolySSJ]

I agree with your point of view and I beleive loan with interest motivates loanee. The loaner only gain is the interest. Getting loans with interests to start a business is a very good move provided the loanee is determined and knowledgeable about the business

In my opinion if someone had to take a loan out from their family and fiends it is generally not a good idea. AS humans there are many that are unable to separate the difference between a professional relationship and their personal relationship and therefore if there are cases where the business will not work out or that it doesn't then I think that the person could likely expect that the friend/family will leave the loan seeing the situation they are in. This also reduced their motivation in the business as well. And yes you are right. The interest is the only benefit for the loaner especially considering the large risk that they are taking.

 

[ahmedo24]

In my opinion if someone had to take a loan out from their family and fiends it is generally not a good idea. AS humans there are many that are unable to separate the difference between a professional relationship and their personal relationship and therefore if there are cases where the business will not work out or that it doesn't then I think that the person could likely expect that the friend/family will leave the loan seeing the situation they are in. This also reduced their motivation in the business as well. And yes you are right. The interest is the only benefit for the loaner especially considering the large risk that they are taking.

I quite agree with you, the motivation, commitment and sensitive to business funded by family support or loan is usually lower because the person might feel in case of any eventualites it will settle within the family.

 

[Kelly5]

I have someone who is interested in the sale of clothes, but he doesn't have any start up capital. He intends to get a loan to get his business rolling, and he seems so sure about repaying it back on time. But I have a bad feeling about this. Is it really wise to go into debt to do business you are just venturing into? I'm not trying to be pessimistic here, but what if the turn up is lower than what he expected? I tried to talk to him about it but he just shrugged it off as no big deal.
Should I leave him to go on with his plan or try to dissuade him?

Personally, I am not a fan of borrowing or collecting loans from banks and other financial institution. Depending on the country of residence of this friend of yours, it is usually not a funny feeling from my part of the world.

 

[BrolySSJ]

I quite agree with you, the motivation, commitment and sensitive to business funded by family support or loan is usually lower because the person might feel in case of any eventualites it will settle within the family.

Yes and this is the wrong mindset to have when going into any business venture. I think that even if you have to take a loan from friends and family, which in my opinion is likely to result in and uncomfortable situation and to a large extent as well that it is likely o damage to the relationship as well if not managed properly, then there must be a strict payment plan that is implemented even if there is not interest, and it must be stuck to at all costs.