Starting a Business? Separate the Myths From Facts

When it comes to starting a business, many people are excited about the prospect. They get to run a company based on a product or service they care deeply about. There’s no boss to deal with and you can work the hours you want.

However, running a business is not exactly easy. A lot of entrepreneurs are optimistic and while that’s a good thing, it’s important to be wary as well. There’s a lot of information out there and some of it is actually misinformation. You need to separate the facts from the myths.

Starting a business? Here’s what you need to know.

Myth: Banks Have Plenty of Money for Startups

The United States is very much a capital-driven economy, so many business owners think they’ll have access to all sorts of money. This is not true. In fact, banks are becoming more and more risk averse. That’s because banks are not the same as investors. They are lenders and want to be paid back. As such, they will require a lot of information, such as collateral, proof of steady cash flow, strong personal credit, and possibly several years of proven revenue as well. It’s not uncommon for business owners to be turned down for a bank loan.

Myth: I’ll Qualify for Any Loan When I Become Profitable

While profitability is great, lenders look at other factors when making a loan decision. They’ll look at cash flow, debt-to-income ratios, credit history, and more. If you still struggle to pay bills from time to time, lenders get nervous. The more documentation, the better. Having tax returns, bank statements, financial projections, and personal guarantees can make it easier to get approval for a loan.

Myth: Leasing is Always More Expensive Than Buying

For business owners, leasing is inferior to owning. However, when running a business, you have to look at other factors, such as cash flow and tax advantages. Leasing can be beneficial because it allows you to preserve working capital. You can lease and pay a smaller monthly payment, allowing you to keep cash in reserve for payroll, inventory, and other expenses. You can also write off the lease payments as a business expense. Another advantage is that leasing allows you to upgrade without the burden of resale or obsolescence.

Myth: Debt is Bad

Debt is not bad. In fact. Most successful businesses carry debt because when used wisely, it is a powerful tool that can be quite profitable. It can be used to acquire assets, invest in marketing campaigns, and take advantage of time-sensitive opportunities. Having money opens up opportunities, so know how to use debt intentionally. Know the terms and have a clear plan for repayment.

Learn More About Business Startups

Running a business can be an exciting venture, but there’s a lot to learn. Make sure you know the facts and do things right away so you can avoid legal repercussions.

You don’t have to run a business solely on your own. Get the help you need from Orlando business lawyer B.F. Godfrey from Godfrey Legal. If you are feeling uncertainty, we can answer many of your questions and help you effectively plan for the future. Schedule a consultation by calling (407) 890-0023 or filling out the online form.

Source:

inc.com/dan-furman/small-business-financing-myths-costing-you-growth/91203103