To save or to take up a loan?

[justSaying]

Hi.
I have been debating about this with friends for long. Is it better to save up to start a business or to take up a loan?

Saving up is time inefficient, though you avoid the interest rates. Loans on the other hand let you start your project now, though you now have to pay up the interest rates.

What tipping point works for you to decide of either?

[delusional]

You almost always need to do both. Unless you start really small, then saving is enough. You need to have about 30-50% of what you want to own as a total capital if you want to loan some money.

[adi004]

i think you should do both, half from your savings then half from loan, at least you wouldn't have to pay too much interest..

[owesem75]

If you know how to run your business and confident enough that you could make it through, it is best to apply for loan and leverage. Use the borrowed capital for (an investment), and work to increase your profits and make it to be greater than the interest payable. From the profit, pay your loan as much as possible and as quick as you can, and so you can enjoy the reward of having a sustainable business started and run from a borrowed capital. Good luck to you.

[Ryand88]

Get a loan then use the savings as a safety net? I think this could work fairly well if you are applicable for a loan but really you should do both as said so many times on this thread ; there is no way your savings could cover all the overheads of starting a business which is where the loan comes in but personal savings are definitely a good start short term but long term finance you need a loan to be able to retain any profit.

[mameeker@cuse]

I would get a loan and try to invest the least amount of money you can into your own business. This is so that the business does not bankrupt you individually.

[Taru]

Loans are much better, in my opinion, given that the plan is solid enough to have the proper exit strategies and more importantly - end goals and realistic timelines. If the plan is good enough, then loans aren't as risky, and in the meantime you can just use the savings for other more minor investments or even to just stay afloat in a personal financial way. It's much better to utilize these advantages where it's available, in my opinion, but only if it's used with respect for the gravity of it all.

[crimsonghost747]

A mix of both. Loan obviously allows you to start faster, and let's face it: the interest rates are nothing at the moment. Just make sure that you can keep paying the loan even if the business doesn't start as well as expected, because otherwise that could leave a big financial problem for you.

[idlecuriosities]

While it is great to have some cash saved up, I think the best decision if you are confident in your potential business is to get a loan. It will help your credit when your business initially takes off, and you've already established a relationship with the bank for when it is time to think about expansion.

[DomDom]

It also depends on how experienced you are. Its always better to save up if you can in my mind because you know the worth of the money and wont squander it like a credit.