Taking a business loan for a new business is assumed to be a bad idea. However, looking at it from a different perspective, when you start a business with a loan, you learn and gain experience on key principles of business management and efficiency as discussed below.
Setting up a business at home has its advantages which are listed below.
1. It helps you to develop proper business values with lower risk
When you set up a business at home; you minimize your expenses by around 20%. Premises are an avoidable expense and when you get a way around them, you are left with a higher net profit. This gives you a chance to pay more and you are able to repay higher amounts for your business loan installments so that you can clear the loan. When you clear the business loan, you can decide to take another one for expansion of your business. The other alternative is to save up for the expansion. Starting a business from home gives you a chance to monitor the critical cost centers and to identify the areas that need more monetary investment. With this realization, you will certainly know the best time to shift your business from home to a leased premise.
2. You do your best to achieve success
When you take a business loan as capital, you realize that you have to work hard to make sure that the business breaks even, repays the loan installment and still makes a profit to sustain its growth. This realization makes business owners who have loan repayments to work harder than those who had the capital to start the business. When business owners with loans adopt a strategy of hard work, they easily manage to pay back the business loan and soon the business performs unimaginably well since once the loan repayments are over, the profits increase. Such businesses expand faster than businesses that were started from savings.
3. It is a learning experience for the business entrepreneur
Setting up business at homes leaves you to take care of the inevitable expenses only. It teaches you how to monitor every cost and this is a great skill that has been used every successful entrepreneur. This simple efficiency grows as your business grows and with time you realize that your business has managed to pay the business loan and from the statement of cash-flow and the savings, you can qualify for a bigger business loan for leasing new premises and hiring more staff to improve on service delivery and increase the revenues by increasing production.
By starting a home business with a business loan, you will most likely encounter all challenges every new business encounters. From high competition due to high production costs to challenges in market penetration, you will learn how to tackle these challenges one by one and when you succeed you will comfortably be in a position to start another home business and grow it into a big business.
4. It helps in building an efficient system for your business
The business environment considers a business loan for capital to be economic suicide. They tend to look at business as a venture that can only be successful when there are no outstanding debts. Many business analysts and advisers will advise against taking a business loan for capital citing a situation where the business will not perform well for the first year making it hard for the business owner to repay the loan and consequently killing the business. There is however stories of businesses that started with borrowed money and they have managed to expand and become standard setters in their relevant industries.
5. Financial freedom and success
When you take a business loan and start a home business; you start a journey towards financial success. At first, you effort determines how much you earn but with a significant growth in business revenues, you can employ staff and let your money work for you. At this point, your time is not held ransom by the business but you still earn more. Starting a business from home gives you a chance to experiment by adding some creativity in your business as you invent new business and productivity systems. This can be very hard when you are being stressed by a high lease or rental bill.
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