When To Say “No!” To More Borrowing For Your Business

When you are in the process of starting a business, your mind is focused on making it work. You have got your idea, your business plan and a single determination to make it work. Knowing that you have spotted a gap in the market or have something extra to add only buoys that confidence.

In those heady days, when everything seems possible, it’s easy to forget the fact that businesses fail. In fact, it happens at a frightening rate. Statistics somewhat vary depending on what sector being discussed, but up to 96% of businesses fail within the first ten years. Not only is that the disheartening loss of a dream and a search for a new career, it can also have significant financial implications.

If you have a solid business plan and good personal finances, you might fly through your business credit check with ease. Still so full of your new excitement and determination, you can become dazzled by the amount of money being offered by investors. It’s tempting to try and launch bigger than you planned, offering a wider range of services or expanding your marketing budget. Other people believing in you – to the extent of investing a lot of money – only increases the feeling that you’re on to a winner.

You may even experience some investors wanting to give you more money than you pitched for. There’s no doubt it opens up avenues into new markets, or brings your timetable for launches forward. It’s tempting to think that you’re in for a penny, and what business owner ever turns down a chance for investment and expansion?

In reality, it’s the savvy ones who know to sometimes say “thanks, but no thanks”. When you write your business plan, you’re going to have a pretty firm idea of how much money you require for your start-up costs. It may sound counter-productive, but even in the face of being offered more, it makes sense to stick to that figure.

Ever since the 2008 financial crash, general economic stability has been at risk throughout the world. It’s worth remembering that crash happened because banks offered to lend more, to people who couldn’t afford it. You may think you are only taking on funds you can repay, but there’s no way of knowing that. The economy might crash, you might find a rival takes over the space you planned to dominate. Perhaps it may take you longer to get established than you planned. Or even personal circumstances might intervene; you may fall ill or need more time for your family, slowing expansion.

It’s worth remembering the old tale of the tortoise and the hare. If you rush out of the gate, you could find the smallest mistake brings your whole enterprise crashing down. By taking thing slowly, building only when you’re ready and not just because the funds are available, everything is safer. Don’t just think about this year; think about 10 years down the road. Otherwise, you risk becoming one of those statistics.

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Ive been blogging now for 5 years on various sites for the love of knowledge share. I decided to start my own blog a few years back to share everything from tech to business news. Follow me on twitter for more.