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  1. Collapse Details
    I definitely agree with the other posters who said some of both.


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    If you have assets that can be used as security to get a loan from a bank and you're certain that the business you intend to start will start generating cash as soon as you get it going, I'd recommend getting a loan and getting straight into business. You don't need to mind the interest you'll pay because heck, if you're making profits, paying a little out isn't so bad.


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    If you're just beginning and lack business experience I'd say you need a mix of both. This way if you fail you got it part covered and can try again fairly quickly. On the other hand, if you fail and a loan is the base of your business it'll take a while until you get back on your feet. Or, like others here suggested, you can just take a loan if you're absolutely sure of how your newly born business will perform.

    In the end, the point of choosing one or another resides in being able to recoup from the money loss as fast as possible in the case of failure.


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    I think results will yield faster if one just gets a loan for starting a business or any other project. Saving may take years and it will waste a lot of valuable time and potential opportunities. With regard to getting a loan though, one usually needs collateral to have proof that he or she is capable of paying off that loan, so that is a completely different story. If someone close can help one out for collateral then that's a win-win for the one thinking of loaning for the project.


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    Quote Originally Posted by janineaa View Post
    I think results will yield faster if one just gets a loan for starting a business or any other project. Saving may take years and it will waste a lot of valuable time and potential opportunities. With regard to getting a loan though, one usually needs collateral to have proof that he or she is capable of paying off that loan, so that is a completely different story. If someone close can help one out for collateral then that's a win-win for the one thinking of loaning for the project.
    This is something I forgot to mention in my previous post. You can't just walk into a bank and expect them to hand you thousands of dollars. If you don't have any sort of collateral then maybe saving would be your best option.


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    I would suggest you save up. If you take a loan, and your business fails. Not only do you have to payback a loan with interest rates, but you also have no income. That is simply to much risk, Unless you are absolutely sure that your business will prosper.


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    Quote Originally Posted by Rainman View Post
    If you have assets that can be used as security to get a loan from a bank and you're certain that the business you intend to start will start generating cash as soon as you get it going, I'd recommend getting a loan and getting straight into business. You don't need to mind the interest you'll pay because heck, if you're making profits, paying a little out isn't so bad.
    I agree with this statement. If you have proper plans and have the calculations done in order, then you'd have a better idea on how to pay out a loan which I think is infinitely better than waiting to save up enough capital. If you calculate it specifically enough, you'd figure out how long it would take to completely pay off the loan even with the interests, given that you view it realistically and also that you provide yourself with some good exit strategies.


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    I would recommend you to try to fund your business from your savings. This is due to the reason that in the initial stages of the business, it is very difficult for the business to be able to cover all the expenses. So, a loan would only add to your add to your existing expenses in the form of an interest burden


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    Billionaire Mark Cuban was quoted in a recent interview by saying that "anyone who takes out a loan to start a business is a moron". I have to agree with him for the fact that until a new business has created enough revenue to afford to payback debt service, a loan should not be considered.

    If you're just starting out, you will need to raise seed capital by way of family and friends, or your own savings, to develop your product or service and to set up the company in preparation for the initial marketing and sales push, which you will be doing yourself since you don't have a sales team yet. As a matter of fact, you will be doing everything yourself for a while so you better be talented and educated in sales, marketing, financing, manufacturing and distribution if you want to survive the first year.

    Forget about going to the bank or looking for an equity partner at this point because you have not proven that your product (or storefront with other products) or service, will be saleable and profitable in the current marketplace. Whatever you do, don’t make the mistake of taking out a personal loan to start a company. In a recent interview, Mark Cuban said that “anyone who takes out a loan (from a bank or private lender) to start a business is a moron” and I fully agree with him because the debt service will kill a brand new business in a heartbeat.

    Until you have "proof of product" and have generated some revenue from sales, no financial entity, public or private, (which includes banks, credit unions, venture capitalists, angel investors or private lenders) will want to lend you money because all you basically have is an idea. All preliminary costs will be coming out of your pocket (or a rich uncle) until you reach the point of revenue generation. If you think that this is not attainable, don't even bother as it will be a losing proposition from the beginning (remember that 90% of startups fail).

    Once you have reached the level of creating some revenue with incremental increases, and you have developed a professional presentation which includes a website, presentation deck, business plan, financial projections, etc., that make you look like a seasoned entrepreneur, you will be qualified to pursue avenues such as crowd funding (to attract smaller angel investors) in order to raise the initial capital necessary to expand the business and bring it to the level of substantial revenue (between $500,000 and $1,000,000 in annually gross revenue).

    Upon reaching this level, you will then be able to apply for debt financing (because you are profitable and your revenue says you can afford the payments) from a bank if you have perfect credit, lots of time to waste and plenty of collateral for them to lien and encumber, or from a private lender who will be a little more expensive, but a lot quicker and more accommodating when it comes to credit and assets. Debt financing, if done correctly, will allow your company to grow and expand at a controllable pace.

    At the next point (3 to 5 years down the road) you will hopefully have a very successful and thriving business, generating $10,000,000 annually, that will attract an equity investment firm who will offer to provide the much larger quantities of capital (and the most expensive) necessary to further expand the company. Most business owners don't want to go this far because of the responsibilities involved in taking on equity partners, the percentage loss of ownership and the fact that there will be another cook in the kitchen that might have a conflicting opinion in the decision making processes of the company.

    Good luck, it's a long and rocky road, only taken by those who have the perseverance to withstand the hard work and long hours needed to achieve success.


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    In my opinion there is no solid answer for this question without analyzing a few things, some include:

    What is your income?
    What kind of project do you want to start and fund?
    Brick and mortar or online?
    What is your knowledge and experience related to the business you want to start?
    Who is your target market?
    Is the product or service you want to market already selling and in high demand? (High demand is always a good thing!)

    These are some questions to consider


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