Business Investment Loan Guide for the Solo Entrepreneur

Given that money is the very life essence of any business, a business investment loan can help a fledgling company expand and develop its operations as well as establish more effective and secure foundations. Newly established companies are in a most unappealing and precarious position because they face an uphill struggle from day one to make a profit due to the fact that they are unknown to the consumer and also because of rival competitors.

Startup

The entrepreneur will have to make capital purchases such as the purchase of business premises, machinery, stock etc in order to actually establish their business and so a business investment loan can help satisfy these costs.

Such loans can also be used in order to help meet the costs imposed and arising from the likes of training of staff, the payment of taxes, or the hiring of personnel. However, whatever the rationale behind the loan, regardless of the purpose the entrepreneur intends to use it for, the entrepreneur must always ensure that truly need the loan and that it will provide some lasting benefit to the business.

Not Free Money

The problem with a business investment loan is that it is not free money and not only must it be paid back, but paid back with interest. While that is obvious, the problem here is that in a commercial setting, and especially in the context of a newly founded business, there are bigger concerns. Previously we mentioned that money plays a fundamental role in the development and success of a business, and while this is still true, we must make a distinction between capital and income.

Income is what the business will make both in the short term and long term as a direct result of the provision of its services and goods and the business that fails to make a sufficient level of income, will fail.

Considerations

A newly founded business will struggle at the beginning of its creation because consumers will invariably be attracted to already established businesses meaning that income will be at an all time low. The danger with a business investment loan (and indeed any form of loan for that matter) is that the interest repayments will act as a steady drain on the income of the business meaning that the business will always have stunted growth due to the loan inhibiting progress. At best, the company will not grow at as fast as a pace as it could, at worst, the interest repayments maybe so overwhelming that the business simply stutters and dies.

If you are an entrepreneur, then you may want to make use of a demand loan which would allow you to make payments when you have a sufficient amount of disposable income meaning that you could scale down the repayments when profits are low, and increase them as they grow. This would mean that neither you nor the business is forced into a rigid schedule of repayment which has a significantly detrimental impact on the business.