The loan will pay for the rest of software I'm building that will automate the deployment of my SaaS platform. This cuts my development time for each new client down by 95% - making me scalable. In a few months I will have it in my hands ready to open up my marketing activity now that I can deliver much more rapidly. It's tempting to use some loan money for marketing activity. Full disclosure, I don't know how to approach marketing yet.
Honestly, bank loans are the cheapest capital you'll ever get in your startup and while the cashflow burden of paying them back is a bitch, the small % interest rate is far more favourable than the equity cost of an investor.
Also, having the loan repayments factored into your business plan will enforce good practices and targets. Planning to bootstrap is the best bet (i.e. making enough sales to pay back the loan, and pay salaries), as then you'll have the *option* of whether to raise any angel/venture capital rather than having it forced upon you.
In my first two startups, I launched the businesses entirely on commercial debt. In my 4th (and current) I've used a mixture of investment and loans. Happy to talk further about both scenarios.
Answered 8 years ago
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