3 Common Myths About Financing A Startup

Having come up with an idea, many would-be entrepreneurs hesitate in sourcing financing, usually because they’ve heard a lot of horror stories about it in the past. While there’s always a certain degree of complexity when it comes to securing business finance, there’s a lot of unfounded and outdated information floating around. Here are some of the most common myths you should forget immediately. 

You Should Never Start A Business With Debt 

If it’s possible for you to secure financing through crowdsourcing, or get private investors to sign up for equity, then you may eliminate the need for a loan or other form of credit altogether. Sadly, a lot of new business owners aren’t so lucky. Many won’t be in a business niche that angel investors will be interested in financing, and a lot of entrepreneurs will prefer to take on a lot of debt, rather than giving up partial control of their business. Naturally, you’ll want to get your operation up and running as quickly as possible, and applying for a loan can often be the easiest way to do this. 

The main point to take away is this: if you shop around for loans, and use it responsibly once it’s secured, it will have little to no impact on your potential for profits. Just make sure you’re asking for enough, and go in with clear projections of when you’ll be able to pay it back. 

Even If You Can Secure Funds, Down Payments and Other Upfront Costs Will Cripple your Cash Flow 

As you’re well aware, there’s much more you’ll need to invest in than stock and a system for processing payments. There’s no denying the need for down payments on an office, and legal permits, or more niche up-front expenses. There’s no getting around the importance of medical indemnity insurance if you’re starting a private medical practice, for example. It may seem like these necessary expenses will be a serious threat to your cash flow to begin with. However, what many entrepreneurs fail to see is that this is more down to the institution you approach for financing. The strain of up-front expenses will be much less of an issue when you choose your financing firm with great care, and make sure they’re aware of the costs you’re projecting. 

There’s A Mountain of Paperwork to Get Through 

Some would-be business owners, particularly creatives, decide to put off pursuing their ideas simply because they think the application process is full of paperwork and hassle. This may have been true at one point in history, but times have changed. With the expansion of the internet over the past couple of decades, business networking and the exchange of capital has become so much smoother, and now there are many companies that make it exceedingly easy to apply for a start-up loan. In fact, simplified, mainly online applications for credit are quickly becoming an industry standard, and more and more financing companies are adopting them just so that they can remain competitive.

I hope you enjoyed this article about common myths you need to reevaluate when it comes to financing a lean startup.

Interested in more articles about business financing?

Read My Posts:

- 5 Fantastic Ideas To Fund Your Startup

- Simple Ways To Cut Your Business Costs

Published by Michael J Schiemer
Owner of Bootstrap Business
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