Starting a business with a loan – the question that is asked every day by entrepreneurs all around the world.
My answer when I got started – YES.
My answer now – NO.
I recall speaking to one of my students who was considering taking out a BIG loan (10s of 1000s of dollars) to start a business.
She asked for my advice.
She knew I did it.
I told her at the time obviously I am biased, I did it. And I don’t regret it. I make a decision that I learned from, that I stand by, and that has helped me be where I am today.
She brought up that Mark Cuban, self-made Billionaire, said that anyone starting a business by taking out a loan is a MORON. I recall seeing it, and found it on YouTube. Here it is:
At the time I dismissed him. I told her, “look, Mark knows better than either of us. But I choose to disagree on this instance, but that does not mean you should take out a loan. At the time I did it, it was the right thing for me. You need to do the right thing for you.”
She ended up not taking out the loan. And I think she did the right decision.
Today, after living the entrepreneurial world for over a year, experiencing highs and lows, and learning so much in the process, I will advice anyone to NOT take out a loan to start a business.
As Mark said, “when starting a business there are so many uncertainties. The one certainty you have is that the loan needs to be paid back.” (I am paraphrasing, watch the video above)
And so – Mark was right. (which makes me a moron…)
I highly recommend you read his book, HOW TO WIN IN THE SPORT OF BUSINESS.
It is an excellent book, and talks more about what you SHOULD do when starting a business.
I will give you a little carrot – he calls it “sweat equity”.
And for a great reason. I know, because I am applying this very concept right now, typing this blog (and recording myself doing it) on the train on the way home at 9:30pm. Dinner is still on the cards for tonight, before going to bed and up at 6am for a coaching session with a client of mine.
So there you go – the answer to that question: “should I take out a loan to start a business?”
Hope this helps – feel free to comment your feedback.
Again, here is the book: Get it now.