Do You Need a Loan as a Founder?
 |
| Photo by Daniel Thomas on Unsplash |
Hanifmr.com - For a long time, it was quite normal that you had to take out a loan as a start-up.
After all, business premises, furnishings, company cars, employees and the like had to be paid for.
But what about setting up a business on the Internet? Do internet founders need a loan?
This is How It Was Founded Earlier
 |
| Do You Need a Loan as a Founder? |
In the days before the Internet or before the Internet could be used meaningfully for business purposes, it was often not possible to set up a loan without a loan.
After all, every new shop, restaurant, workshop, etc. opening is accompanied by a need for investment.
And so you either fell back on existing equity or you had to take out a loan.
This usually came from the house bank, which was more or less careful and did not give everyone a loan.
Hopefully, over the following years, your own business would be successful and you could repay the loan.
How is Founded Today?
Even today, it looks the same when opening an offline business. You still need business premises, materials, products, employees, and much more before you can even start.
And until the cash flow is (hopefully) realized, you usually don't need a little money. The house bank is still the first point of contact, but there are other options, which I will discuss below.
However, the market has changed significantly in the wake of the financial crisis. Today it is much more difficult for many start-ups to get a loan.
There is also the option of starting a business online. And here the necessary initial investments are usually significantly lower.
Online and Offline Formation
In contrast to a “brick and mortar” business, the entry costs for online start-ups are relatively low.
You don't need physical business premises, you can often set up a business from your living room. It is also not necessary to have a company car or to place expensive print advertising.
Of course, it depends on the specific business idea, but from a financial point of view, starting an online business is often much cheaper.
However, the low financial hurdle for starting an online business naturally means that a lot of people are going this way. While you have to fear relatively little competition when opening a new restaurant (because a few others will not spontaneously open a restaurant on the same street), the competition on the Internet is quite high and new competitors are added almost every day.
This means that starting a business on the Internet often only appears cheaper at first glance. A lot of work or money is necessary to survive the competition.
Do Loans Make Sense for Online Founders?
If you compare the two variants, you will notice advantages and disadvantages. One can say that a founder often doesn't need a loan on the Internet.
Of course, it looks different from an online shop. Here you need goods and usually also the staff.
Still, most websites, blogs, and other online deals are very cheap to start with. And even with services that are provided directly or indirectly via the Internet, a large investment is often not necessary.
As a rule, an online founder does not need an external office, new office furniture, or a company car. A computer, a printer, and a decent desk are the only really necessary things for many online founders.
When your own online business then picks up speed and you get a feel for whether it works, you can still take money into your hands and rent an external office, for example.
Setting Up a Business with or Without Money on the Internet?
But just because you don't necessarily need the money to start an online business, the question arises whether it doesn't make sense to invest money in your own business.
Here are a few reasons why it can make sense to take out a loan when starting a business:
- Money Instead of Time
The fact that setting up a business on the Internet does not cost any money is only because you exchange money for time. Many online founders invest a lot of time and effort into building their websites.
This in itself is also a good thing and one of the benefits of doing business online. However, at some point, there comes a point where you stand in the way of growth because you can no longer do everything on your own. That is why at some point later there comes a point where it makes sense to take money into your hands and prefer to let others do certain services.
However, depending on your know-how, this is only necessary later, when your own business is already making money. - Know-How and Quality
However, if you do not have the necessary know-how, a certain financial requirement is already present from the beginning, even with an online start-up, to outsource the creation of a website, for example.
Of course, the quality of the work also plays a role. You can perhaps do some things yourself, but if the quality is not right, it will not help your own business and may even harm it. - Customer Acquisition
An important point that should not be underestimated is customer acquisition. As an online service provider, in particular, you first have to find customers, and that's not that easy at all. Certainly, there are free options here too, but depending on your industry, it can make sense to invest money in customer acquisition.
In this way, you can get to customers faster and thus also more quickly to generate more income. Those who prefer to proceed free of charge may save money first, but if it then takes significantly longer to acquire customers, this can be “expensive” if, for example, you run out of liquidity. - Missing Cash Flow
Especially at the beginning, you will hardly have any cash flow because you have to establish it first. Depending on the business model, this may take a while. However, I would not advise you to take out a loan to cover your living expenses alone.
You should invest borrowed money in the company so that you can earn more money faster. It is therefore generally important to be able to cover your living costs with savings, a partner, or something similar.
Opportunities for Loans
As already indicated above, there are certainly more opportunities to take out loans today than there were 20 years ago.
- Classic Loans
The classic loan from the house bank is still the first choice for many. That can be the case, but you should compare the cost of the loan and the terms.
However, it is problematic that the loan commitments are now tied to much stricter criteria. That is not bad in itself, as in the past, loans were sometimes given to start-ups that were doomed to failure from the outset.
However, many founders today complain that they can no longer get a loan, despite a good business model. - Funding
State-funded financing options are another way of obtaining financial resources. These grants are often a little easier to come by.
However, some requirements must be met here. In addition, the funding has been reduced somewhat in recent years. However, it is still worth finding out more, as each federal state also offers funding opportunities.
To the funding check for founders and the self-employed. - Personal Loans on the Internet
The Internet has brought with it a new possibility. Loans from private individuals enable you to finance your own business independently of large credit institutions.
Providers like Smava allow relatively high sums (up to 50,000 euros), but also offer small loans. Of course, you should also take a close look at the conditions and requirements here.
One should by no means blindly use such providers, but at least they offer a new way of taking out loans that did not exist in the past. - Crowdfunding
The topic of crowdfunding is exciting. More and more platforms are offering this on the Internet. Founders can present their ideas there and if there are enough people who want to finance this idea, you get the money.
Of course, investors expect a profit here too, but the approach is of course interesting and founders with a good and profitable idea can be successful on such platforms.
Here, too, it is important to take a close look at the conditions and weigh up the risk.
In addition to the classic house bank loan, there are no other options for founders. However, with each of these options, one should be aware that a loan must be paid back.
Conclusion
Starting a business online is often quite cheap and that is why many online founders do not necessarily need a loan. Nevertheless, it can sometimes be useful to invest the money instead of wanting to do everything on your own.
Before taking out a loan, however, you should always find out exactly the conditions under which it is offered and plan realistically how you want to repay it.
Because the failure of your independence is not so great in itself, but if you then also sit on a mountain of debt, it is all the more critical.
Post a Comment