Is a banker really your start-up friend?

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ymhg0kygvc-clem-onojeghuoThe other evening a business radio show had on a banker who was saying how many loans his institution provides to entrepreneurs. He said that the bad debt percentage was about 3.8%, adding that entrepreneurs manage their money carefully and pay back their loans. If they run into trouble, the entrepreneur would sit down with his or her banker and work out a repayment plan.

Now I need to be careful what I say about bankers because many moons ago I worked for a bank. I saw things there while working for the bank that gave me an inside perspective. One of the things that impressed me was when a certain investment was oversold to pensioners, the bank made good on their clients’ losses. Perhaps it was to quell a public outcry but to give the bank credit, it did the right thing.

But bankers need to be good business people and the tendency is to minimise as much risk to them as possible. Their loans are usually watertight because they require guaranteed assets and personal sureties in the case of lenders not being able to pay back their loans. This is why entrepreneurs are weary of loans from banks and make sure that they use the right company structure to take on loans and in some cases refuse to sign personal sureties. When it comes to loans whether it be for homes, business assets or overdraft, the bank is never going to lose. It will move mountains to recover its money. There is nothing wrong with this in principle as it is merely prudent banking but if you run into trouble as a small business or entrepreneur and you are on the wrong side of a bank, well heaven help you.

These days you don’t need to necessarily rely on banks for start-up capital. There are other sources of funding. Crowdfunding is one of them. With crowdfunding you don’t have to sign personal sureties. But for your own credibility, you had better make good on any promises you make about supplying your eventual product or service.

Start-up founders and people starting something from scratch would tend to rely on their own hard-earned savings or loans from close family and friends. This doesn’t mean to say that that this is a soft form of financing. Whoever loans you money, will want a return on their loan and when the time comes they want their loan paid back in full.

You cannot afford to play with your own hard-earned savings when investing in a start-up. Taking a promising business idea and turning it into a viable product, service or small venture requires some sort of seed capital. This means you need to be careful with your own hard-won seed capital and minimise the risk in your venture as far as humanly possible. If you are thinking about turning your promising business idea into a product, service or small venture, you may want to get hold of a new resource “Breakthrough Ideas”. This guide will help you iron out risk in your best business idea using the most prudent approach as possible.

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