You are about to learn the advantages and disadvantages of taking venture debt for your startup business. The first three to five years of a startup business are so challenging.
Just like raising a baby, you need to be a parent for your business. It needs your attention! Most startups are having trouble with capital.
That’s why they take a venture debt to save the business. Instead of getting confused, it is better to call a financial advisor to help you. Learn about the advantages and disadvantages of taking this debt below.
The Advantages of Taking Venture Debt
Indeed, the main advantage of taking this debt for startups is to get more capital to grow their business. At the same time, you don’t have to give additional equity. It means that you can still be the owner of your business and control it as you wish.
Flexibility is another reason why this debt is suitable for startup business owners. As a lender, you can repay the loan according to a more flexible agreement. As a result, you have enough time to tailor the business funding.
Then, you can still run the business and pay for the loan. Interestingly, the providers support your business to grow. They are not leaving and waiting for you to pay the loan. Instead of doing that, they will help you to connect to potential customers, partners, and investors. Indeed, a chance to grow your business and pay the debt is bigger.
The Disadvantages
Despite the advantages above, you still have to consider the disadvantages of taking venture debt. It can be your consideration whether to take this debt or not to grow your startup business. The risk of taking this debt is still high.
Imagine that you are running a startup with unstable capital and financial conditions. The failure to make payment is higher. This condition significantly affects your credit rating.
The lower your credit rating, the more difficult it is to find funding programs in the future. It is also about the high interest rate you should pay. This term and condition increase the overall cost.
Indeed, it reduces your business profit. As a business with unstable income and capital, it will be hard to pay the regular payment.
So, the decision is yours! This debt may lead your business to grow. Yet, there is also a chance that it makes your business fail and even bankrupt.
The best strategy you can do is to consult your plan to take a venture debt program to a professional financial consultant. They will lead you to the right path and save your business from a fatal decision.
