September 11, 2018

The surprising secret to funding a successful startup

When beginning a startup business, many entrepreneurs tend to ignore the significance of where their debt financing comes. This can be a costly mistake. Recent research has shown that using a personal loan, in contrast to a business loan, can make you less successful in future endeavors. The study didn’t examine why, but there are a number of possible reasons the type of funding makes a difference and can contribute to better and faster business growth.

Key Takeaways:

  • Even if they don’t need a loan to survive, startups might benefit from some debt from business loans.
  • Business loans can benefit startups by building credit ratings to enable them to apply for future loans and negotiatie better loan terms.
  • On the equity side, previous research indicates business loans help firms raise venture capital and receive higher IPO valuations of their shares when underwritten by their banks.

“These financing details are noteworthy because recent research shows a connection between debt use and venture success. Compared to equity-only firms, startups initially using business loans have higher average revenues and survival rates three years later.”

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