Start-up entrepreneurs need to rely on external capital to get their businesses up and running. This is a fact which they need to accept whether they like it or not. They can restore to bootstrapping to achieve their objective. However, a stage comes which they realize this mode of finance is going to take them very far. In such a situation, they have 2 two option open to them. They issue share to the general public, approach a venture capitalist or an angel investor. However, they are unlikely to retain full ownership and control by taking this step. This is why many of them opt for debt financing.
Arnon Dror Creo Americas – What do entrepreneurs need to consider when using debt financing?
Arnon Dror is a prominent financial executive in the world of international business. This MBA graduate has more than 20 years of valuable experience under his belt. He has the distinction of discharging the office of Vice President in more than one company. Xerox, Creo Americas, Scitex, Kodak, Creo Inc. and Presstek are some of these establishments. The top managerial personnel of such organization is grateful for his services. They consider him the primary architect in converting their corporate enterprises into profit-making entities. Many of them even admit his track-record in the area of internal reconstruction is very impressive. They even acknowledge he specializes in many diverse and complex fields. These include international taxation, internal control, cash flow management, IT systems, ERP integration, and corporate mergers.
The Arnon Dror Creo Americas team of experts say debt financing can work wonders for start-up entrepreneurs. However, you need to remember an important fact. They need to generate enough revenues from commercial activities to pay back what they owe. If this is not the case, they could find themselves in trouble. This isn’t what they want. The professionals clarify these businessmen need to consider the following 2 important factors when taking this step:
- Costs
This is one aspect which start-up entrepreneurs can’t afford to ignore. They got to face a harsh reality. Most credible lenders don’t place them in the same category as other businessmen. These financiers feel there is a greater likelihood they lose their money by funding these proprietors. After all, there isn’t any guarantee the establishments of these owners are going to succeed.
Moreover, many of them may not be in a position to offer suitable collateral. Even their creditworthiness in the market is questionable. These businessmen need to convince these financiers that they are wrong.
- Expected Rate of Returns
Prominent lenders obviously expect a lucrative rate of return on their money. Only then do they provide the sum start-up entrepreneurs require. They are one who dictates the rate of interest and other conditions on such funds. These businessmen need to accept such guidelines. They also have got to ensure they repay their dues on time. If this is not the case, the financiers have every right to forfeit the collateral of these owners. It is the cost they have to pay for their default.
The Arnon Dror International team of specialists clarify that entrepreneurs can raise the money they need through debt financing. However, when applying for commercial loans, they need to keep the above 2 important factors in mind. Only then should they make a decision keeping in mind their best interests.
