You sound like someone who is very uncomfortable with the possible risks of taking on debt. For you, it will be important to consider asset financing as your primary way of raising money. Read further in this lesson and see if equity financing sounds like another possibility.
You sound like a reasonably cautious person who might be willing to take a “calculated” risk, but not a “blind” risk. This is a very good attitude to have about debt financing. Your approach to debt is sensible and practical. Well done!
You are probably a person who is more comfortable with taking risks than most people. Slow down a little bit and be sure to carefully consider all the pros and cons of getting a loan before you sign that dotted line. There are liabilities as well as possibilities when you consider debt financing for your business.
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The Paul Orfalea Story As you can see, loans can be hard to get and they can be risky, but sometimes a loan allows an entrepreneur to do things he or she would never be able to accomplish any other way. Take Paul Orfalea, for example — a young man who definitely did not seem to fit the model of a successful entrepreneur. He was an awkward red-head who was called many unflattering nicknames, had a severe reading disability, and a D average in school. Because of poor grades, Paul thought it was unlikely he could get a decent job when he graduated. So he moved to Santa Barbara, CA to be near a college. Then Paul borrowed $5,000 from a bank to open a school supply business in a 100-square-foot garage. He used the inventory of supplies as collateral for the loan. Once the store opened, Paul displayed the products on the sidewalk to grab the attention of students on the way to class. He named the store Kinko’s because of his red, curly hair. No doubt you’ve heard of Paul’s company. By the mid-1990’s there were over 800 Kinko’s branches across the world. FedEx acquired Kinko's in February 2004. Two months later, Kinko's was re-branded as FedEx Kinko's Office and Print Services with more than 1,500 locations in 11 countries. And it all started with Paul Orfalea’s willingness to take a risk and sign for a loan. As you can see, debt financing can be effective if used at the right time and the right place.
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How do you feel? Would you borrow money to start a business?
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