Answer:
Many times loans are critical to the success of the business. Most businesses that fail in the first three years do so due to insufficient capitalization. Many entrepreneurs do not take into account the ramp or how long it will take to break even and make a profit. They start the business and expect people to walk in the door on Day One and start buying things. It doesn’t happen that way. Stores build over time. It’s extremely likely that a store will run at a loss for a year or even longer while it builds a clientele, a reputation, relationships with customers and so forth. When you sign a lease for a storefront it’s usually for about 3 - 5 years. No matter what else happens, you have to pay the rent for that period. If the store is not making money yet then you have to pay that rent out of savings. If you can’t pay the rent you are going to go bankrupt and be evicted. Being capitalized sufficiently is the Number One consideration you need to make when starting a business.
Explanation:
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