Loan vs Investor | Which is Best for Businesses in 2024?
There are tons of people out on social media giving business advice. Some of it is good advice, but most of it isn’t good. In this new series watch CapForge’s owner react to different advice videos. He’s an expert in all things business and has 20+ years of experience under his belt. Some of the things he reacts to might even surprise you!
CapForge Founder and Owner Matt Remuzzi reacts to this video about which is better, a bank loan or an investor.
Video Transcript:
Business Advice Video:
Would I go in there and get a loan or raise money for investors? I think if I was doing my first project I might prove it with going in there and getting a loan. Although for most people super uncomfortable going into the banks, like going to court and being interrogated. I would always go to investors because you can go on do numbers and numbers and numbers of projects. There’s so much money out there available for you to get access to.
Matt’s Review:
Okay, so the advantage of a loan is they don’t own you. When you pay the loan back, you’re done and 100% of the business is yours. So if you’re gonna borrow money you just need to make sure that the business is viable and you’re gonna be able to pay it back. If you’re not sure then don’t borrow it. With investors, if you take money from them, they’re generally gonna want some profit share, some payback. But they’re also gonna want to own a part of the business and now you’re connected to these people indefinitely, even if long after you’ve made way more money than they put into it, and you’re still again you’re the one doing all the work. So my suggestion is make sure you understand why you’re using the money or what you’re getting the money for and how it’s gonna be used. If you wanna do something risky that you’re not sure it’s gonna work well, with investor money you don’t have to worry about paying it back if it doesn’t work. So there’s that advantage. But if it does work out well now you got partners forever. So it’s again not one or the other, one’s better one’s worse, or always do one don’t never do the other. It just depends on the circumstances and what you see for the long-term outcome of the business and what you’re willing to take on as far as risk. With the bank when you borrow you’re gonna have to pay it back whether the business works out or not. With investors, if it doesn’t work out you don’t have to pay it back, but if it does work out you’ve got partners you may not want for longer than you want them.
