Does your startup really need a small business loan?

By | September 29, 2008

Many people who start up a new business do so with minimal money, keep their requirements down until the income increases. Unfortunately others opt often at the advice of the bank manager and / or business partners to get a small business loan. Then down the road run into problems… be it surviving or have the money at hand when really needed. Now this is a ‘tech’ blog, so obviously the focus will be on technology.

Don’t fall into the trap of considering a loan on…paying for peace of mind, quick sourcing and quick scalability. Do your own home work, research, ask advice and if you know another small business that has been around for over two years ask their advice if possible.

Business Connections
Join LinkedIn and if suitable ask questions in the Q&A section, read through the Q&A section. However be weary of the advice as someone might just want to sell you a product or service! Find out about business breakfast clubs, associations etc that don’t cost a yearly fortune to be involved with and seek advice. In the UK business link can be a very useful source for advice.

Computer hardware
Think online, don’t think that huge Comet, PC World store etc down the road which is easy to browse. Shop around for good deals on your hardware. Also do all the computers your business require need to be the latest and greatest with slick cutting edge graphic cards when you might just be using them for database, email, spreadsheets, wages and word processing? If you are starting off with more than one employee, buy laptops for those who really need them. A laptop is cheaper to buy and cheaper to upgrade.

Open Source
Microsoft Office even the small business edition is not worth the money in my opinion. Everyone is familiar and used to Excel, Outlook and Word. However using Open Office and Mozilla’s Thunderbird instead might well be ideal for your small business requirements. Worth investigating, especially as they are free.

Does your brand new small business that might have five employees within six months really need an expensive Microsoft Windows server with a support contract to boot? There are cheaper server and network device options to cover backup, connectivity, security, storage and not compromise your desktop requirements. Plus if one device goes down, if properly configured or good support you can still use the other devices.

I’ve seen expensive routers used and configured in such a manner that a cheap router would of done the same. However the support firm they brought it from where a reseller also and supplied the expensive router… wonder why.

I’ve seen expensive servers used when a business only required backup, broadband, email, security and office apps. Same situation as above, plus when the business have a problem they were using ‘certified’ expensive specialists to resolve the issues…. yes they really needed their own inhouse email server (not).

I see this time and again. Small Businesses paying a fortune for what they would call reliable, dependable computer support. In a sense paying for peace of mind from a medium sized computer support company. There are so many that will come in do the spec, supply the hardware and software, setup your network and provide onsite and offsite support whenever required. All sounds great until a point (the money and wrong hardware and / or software sometimes)! Do your home work and shop around, ask advice from others and research. Do you really need offsite support on a rolling yearly contract if a good reliable local small firm can walk down the road to help you on a per issue cost?

If someone is going to put together your requirements and then sell it to you, perhaps you should get a few quotes at least from different firms? Seek advice from other businesses that have been running for more than two years and ask their advice. From the support firms ask to see testimonials etc. A wrong mistake here can seriously set a small business back.

Use an online stationary company rather than pop down the road to the local stationary shop. Buying some items that are used daily in bulk will save you some money. It is all about predicting when you are going to need the items. You don’t need a complicated system, piece of paper with a chart and someone just puts the latest stock level and when a level is reached, you buy. Better than someone dashing down the road and paying five times the price.

This blog entry could go on and on! Essentially I am telling you to question the advice you are given, research alternatives and see if they are viable. Others will see the wisdom in pumping in large amount of money for countless reasons, I would question this. After all it is your ‘small business’, not a large corporation and you personally need to question and be in control of your spending. Then you might discover along with other judgment calls (size of office, location, serviced offices, water cooler etc), that the loan could be smaller or isn’t need at all.

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2 thoughts on “Does your startup really need a small business loan?

  1. Jade

    With office rental increasing, it doesn’t make much sense to have a physical office. I believe the future of most businesses will be virtual and leveraging off using a virtual office space.

  2. Neil

    I think just about anyone can start a business with capital, but it takes someone entrepreneurial to get a business going with next to no capital. If you’re really convinced a business loan is for you then I found this article about maximizing your chances of obtaining small business loans

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