1. Do an accurate set of financial projections. This can save you a ton of grief. On the one end of the spectrum, without going through this exercise, it's possible that you won't ask for enough money. I worked with a client a while back who thought they needed X amount of dollars but when we looked at the project, they actually needed to borrow 3 times that amount to do what they planned on doing. Sometimes when we're acting from pure emotion, we don't have that level of objectivity to see the hidden costs. If numbers aren't your thing, work with someone who has strength in that area.
2. Know thyself. If you're someone is so passionate that you just jump into all kinds of risk without even thinking about the financial cost - slow it down a bit. Knowing yourself is a good thing. If you're someone who spends frivolously on everything that catches your eye, you may want to rethink why you're borrowing money.
3. Be honest with yourself. Don't kid yourself into believing that you're borrowing money for growth when you know you're borrowing money to pay down debt. If you're the last of the big spenders and don't pay attention to what you're spending, don't borrow. One of the problems that people have is that they're in denial about where their business is. If you are someone who never looks at your balance sheet, has no idea what YTD stands for or keeps everything in a Sobey's bag for 3 years, I'd be reluctant to borrow money just so you have cashflow. Don't lie to yourself.
4. Include the family in decision making. Here's a trend that is happening more often than we like to think. One person is the business owner - the spouse takes a hands and eyes off approach to what they are doing. Often there's overspending going on - borrowing from Peter to pay Paul until one day, the well dries up. Then the shit hits the fan and there's no option but to come clean. Sad when it happens and marriages have failed as a result. So, if you're new to business, don't go down this path. I'm not certain what the solution is but mis-representing your cash position to a spouse is not a good thing. Maybe including the family in decision making is a good idea. Maybe not! You get the idea.
5. Know when it's time to wind up. This is a sad reality. Sometimes when you hold that mirror up to people and they get a good hard look at the realities of their business -- the writing is on the wall. You don't need to borrow money. You need to think about a new line of work. It's a hard pill to swallow for sure!!!
If you take all of this into consideration before you borrow - you may make a better decision.