There’s a saying that “it takes money to make money,” and it really describes the process for starting your own business. You need money for start-up costs, capital, and investing, but from where are you supposed to get the money? Most of us turn to loans to create the financial cushion we need to get our business off the ground, and therefore, we immediately find ourselves in debt. As a profit first coach, I want to see you avoid the debt pit and stay flush.
If You Bang Your Head Against The Wall, It Won’t Move But Your Head Will Hurt
The practice of using a loan to start a business is so common, that most business owners simply accept that they will be cash poor and managing debt. However, too many owners find themselves climbing further into debt which quickly accumulates; I have seen ranges from $5,000 to one million dollars of debt. It might have been necessary to get a loan to get their business going, but now it’s such a significant amount that they can’t knock it down or make progress on the balance. Debt can quickly get out of control.
The best option is stop the practice. Too often, business owners have the money, but they fear using their life savings or hard-earned income. This is when they seek out loans. It seems safer to get a loan and keep your own money. Too many people don’t think about the interest paid on the loan, and that is the single biggest reason to use your own money instead.
Safest Way to Invest Is To Use Your Own Money
The ironic truth is you do lose more of your money with a loan because you pay more with the interest. When you use your own money, then you avoid the biggest source of debt: interest rates. If you must decide to invest $50,000 of your own money or $50,000 from the bank, you would probably choose the bank—it seems safest to play with someone else’s money and keep your nest egg. However, you end up carrying a huge burden that comes from big debt and the interest on the loan. You eat away at your nest egg, anyways.
Flip the choice and opt to use your own money. When you rely on your own resources, then you avoid debt and begin to build your profitability. So invest your own money and make the smarter choice in the long run.
For more help avoiding debt, turn to business coaching. There are answers that can guide your actions as an entrepreneur. Get started avoiding debt with this short 4 minute video on how to grow your business without going more into debt. Then, schedule a Business Breakthrough Session to make the most out of your investment.
Jennifer Dawn has grown two multimillion dollar businesses and now mentors others to do the same. She is one of the select few nationwide Profit First and Provendus Growth Academy Certified coaches…
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