Shark Tank has become one of the most fascinating shows on tv regarding entrepreneurship and capitalism. One of its current “Sharks” is Mark Cuban, he is a man I respect immensely in terms of business development, entrepreneurship and creating wealth. He has also been quoted as saying that he would never start a business on a loan. Why would he say that? There is the fact that it is more profitable for himself and his show to give capital to entrepreneurs for ownership and equity in these new businesses, if the entrepreneur figured out how to secure financing then clearly that would not benefit the premise of the show. That said, he may really believe that is an important aspect of starting a business. I think he is completely wrong and I’m going to prove it with some concrete examples.
I have started multiple multi-million dollar businesses and each of them was started with some sort of loan or funding that I had to creatively secure in order to get these businesses off of the ground. So from my own first hand experiences I can tell you that in order to begin and at several turning points in my businesses the ability to secure capital for them has been a tremendous key. So that said, allow me to share a much better example of businesses succeeding due to a business loan or some sort.
Allow me to present Walmart. We all have been to Walmart and have witnessed its growth first hand. Decades earlier it was begun with one store by a great man named Sam Walton. Sam started his first store with a loan of $20,000 and $5,000 he had saved up. He continuously tinkered with the discounting methodologies that he would develop over the years to create the biggest global retailer in the world and he would never have succeeded at growing it the way he did without constant financing.
At one of his first stores he secured a loan for $1,800 to finance an ice cream machine that he used to sell ice cream outside his store and attract new customers. He was nervous about the loan, but it ended up increasing his sales significantly. As he began to grow from his first variety stores to his first full fledged actual big box store Walmart he went around looking for capital from investors. Each investor passed on his business model believing it would not succeed long term. So Sam “borrowed to the hilt” and risked all of his personal assets in order to build Walmart and grow it exponentially. Walmart now has thousands of locations worldwide and had annual sales recently of nearly $500 Billion Dollars. It all started with a loan and was grown with significant funding. Additionally if Sam were still alive today he would be the world’s richest man and be valued at 160 Billion nearly double what the current richest man Bill Gates is worth (about $80 Billion) so suffice it to say understanding how to start a business with a loan can be one of the best decisions that a business owner ever makes. Comprehending the best methods to secure growth capital as your business expands can be vital to long term growth and success.