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Small Business Loans Are a Bad Idea

IStock_000003927064XSmall Today, there was a story on AOMID News about small business lending called Small Business Loans To Drive Economy In 2011.

They indicated that unless government implemented effective solutions to inspire banks to lend more to small businesses, the economy will be hampered for years to come.

Some time ago, I wrote a blog post on the idea that it takes money to make money is dead. This idea is deader than ever today.

In fact, most small business loans are a bad idea. Here's why.

Many small business owners look for the easy way out to get a business running. In the past, that easy way was to get a loan.

Unfortunately, that idea didn't work very well since a lot of small businesses fail. This left the owner in deep debt for years or bankrupt and also hurt the lender.

The real secret word that makes small businesses successful is not lending. It's sales.

Proving the viability of a business concept by selling (or pre-selling) the offer first is a key to launching or growing a small business while minimizing risk.

Generating sales forces a small business owner to prove the concept first. Not on paper, but in the real world.

Once sales are established cash flow is created. Then the business owner can choose to invest a portion of the success they generated through sales back into the business to make it grow or use the sales track record to prove to a bank the business has an offer that clients will buy.

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