It’s an economic trend to start up a business. With where the world and economy are going… We all need to own businesses, if not to create wealth for we at least create jobs! Businesses are contributing tremendously in the economic growth and development of all economies. Uganda for instance is known for its fast growth in business startups especially in the informal sector; no wonder there’s great need to formalize the informal sector! Starting a business isn’t as easy as it seems, businesses need started up capital, and you either invest personal savings, obtain a loan or get an investor!
Borrowing funds to finance a project does benefit the project as business owners don’t have to rely on personal savings and credit cards to fund new ventures. Like most entrepreneurs, financing your new project is one of your biggest challenge. How you fund your project/business depends on the nature of business and your personal financial situation.
Almost every one needs to take out a loan to initiate/execute a business transaction but how do you go about it? There are professional financing options like credit unions, banks and peer to peer borrowing that could set one up.
Before borrowing from a bank, try joining cooperatives and engaging peers as it is much easier to acquire a loan where you’re known. The established relationship with your cooperative/peers may pay off in terms of credit policy/terms and conditions such as interest rates, security and payback period which may be negotiated.
Pay attention to the interest rates and the repayment period. When considering the interest rates, bear in mind the profitability of the business/project. Anticipate, calculate your profit margin and the time it will take to achieve it. In other words, foresee the breakeven point of the business/project
Endeavor to use the loan appropriately for instance to purchase company assets, support cashflow and start building your business.
Keynote; for any financial institution to agree to remit a loan, a business plan is important. A good business plan will answer question of management, marketing, and number of employees, anticipated profit margin, challenges and how it would be addressed.
It’s also important to start small and grow instead of big and drown in debts. Always avoid liability if you can. Usually financial advisers wouldn’t recommend a loan for a small business which one could easily save up for, however if you’re organized a loan wouldn’t cause any harm.
After obtaining a loan and executing the business, it’s important to account for it. Depending on the size of the business you may or not hire an accountant. For starters try to document your business transactions in the simplest understandable way by yourself until the business can afford to hire more employees/accountant.
Accountability aid decision making, whether or not the business is viable, whether it was worth it to obtain the loan as well as scheduling loan repayment processes. Actually, you don’t have to wait until the pay dates, the earlier you pay back the loan, the better for the business.
Now that you’re guided, what’s stopping you from starting that business and building your empire!
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Incredible