Startups need just as much manual work to be done as mental mappings and thinking ideation. Investing in a business, small or big, is something which should be done wisely. For setting up a startup, capital is the initial funds required and there are several ways to get your capital. Given below are the pointers to know the best about a small loan for your startup:
Basically, there are two things an entrepreneur ponders over before getting the funds raised:
- Venture capital
- Bank loans
Venture capital v/s Bank Loans
Putting in brief, venture capital is not really preferred because of the attached cost factor. The investors do not give you a fixed rate of interest rather expect the returns to be as high as 6 times of the initial investment (whopping inflation). Not just this, you might as well have to share the profits.
On the other hand, bank loans are the safest and wisest option one can go for. Taking small loans from the banks benefit in some ways. A few can be explored as under:
- Fixed interest rates between 13%-17%; so one gets a fair idea on the EMI value
- You don’t have to share your profits with the bank
- Since a small amount is borrowed, a comparatively smaller rate of interest will be charged
- Few tax benefits are also endowed upon the loan borrower
Taking loans and starting a business is wiser, compared to investing with your hard-earned savings. Even the Management Science backs the idea. It is definitely a good idea to take loans, small or big, to start your open venture. Taking loans to ensure that you have enough funding to get the business started and then run it steadily. It can cover up for brand building, marketing of the startup, software purchases, etc. Once your business kickstarts and the returns flow, you can gradually start paying off your debt.
Read More: Business Loan for Startups
Loans are not bad; they can just be expensive. They somehow have a bad reputation for times when it turns into bad debts. That is the primary reason people think quite a lot before taking loans even when they know at the back of their heads Loans really help you take a sigh of relief in almost every place. All you need to follow is to become punctual when the loan falls due.
A quick through on the pros and cons of a small loan for a new startup:
- Ready availability of access to cash
- Valuable assets serve as collateral
- Relatively good for businessmen with limited financial past
- High credit score required
- Good for smaller loan amounts
- Asset kept as security would have depreciated by the time the loan is repaid
The world of business is quite complex! It can turn your heads 360 with just a head start!
It surely can be tough for beginners when starting afresh. A startup business loan can be tricky if you have no proven business past.