Why Is A Loan A Better Funding Choice For A Start-Up Than An Investor?

Well, business is not all about making good money and living life on your terms. This is precise, the mindset that comes into the mind of most wanna be desk job quitters. These are the rewards that one gets after they have established themselves as a successful entrepreneur and business is running seamlessly.

To be your boss, you have to make a lot of sacrifices and put a whole lot of effort. After that, the most challenging part will be to get the resources required to start the business. You might hatch the unique idea for your start-up, but without funding, this will be just a pipe dream. A right amount of money is needed to turn your dream into reality. For that, you can arrange via two ways either take a small business loan in the UK from a lender or approach an investor.

Which One to Choose Between a Loan and an Investor?

You will find several kinds of tools available to fund your business, among which the most popular ones are loans and investment from an external source. Before making the decision, you must realise that which one to choose. Getting the funding part competed from an investor might not be a perfect idea; then it might look from the surface.

Here, in this blog, we have prepared a list of different reasons why you should avoid an investor to get the start-up funds. So, let us see them one by one.

Your Business is No More Solely Yours

The first and most significant drawback of getting business funding from an investor is that your business will not be only yours. The moment you sign the deal with an investor, that person will be your official partner who will own a particular portion of your business. It could be either shares or ownership in the company.

Getting a Loan is Comparatively Easy

After that, the most important that might even disappoint is that you will not be alone who will get to make the decisions. The investor will also play a crucial role in taking the critical decisions of the business. On the other hand, if you are taking a loan to fund your business, you will have not to face any of these situations, and you will be the only owner of your start-up.

Another big challenge is that finding an investor for your start-up might not be that easy. Well, it’s a serious business where lots of money is going to be pumped in, so the investor will take a thorough check before financing your start-up. The investor will be checking various aspects such as:

  • Your credit score
  • Business idea whether it will work or not
  • Working team members
  • Business plan

Whereas the only thing the lender will consider is your financial circumstances. And, even if you are unable to provide any collateral for the loan, you might still manage to fund your business with unsecured Personal Loans in the UK.

Chance to Lose the Company

The larger is the amount of funds that you will be getting from the investor, the more will be his control over your business. If you are not able to handle your business in an efficient way or your firm is struggling to manage the profits, then you could even lose your company. The investor might take over the company from you if he has a good number of shares whose chances are quite affirming as you will be a start-up.

Whereas in failing the payment of the loan if you are about to take, you might face legal actions, but there is no such thing that your business will be taken over.

Wrapping up, these were the overall reasons why it is better to go for loans to fund your start-up rather than approaching an investor. The last call will be only yours, so make sure that you have measured all the pros and cons before making the final decision.

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