Personal debt can be a heavyweight on your shoulders, whether it’s due to student loan debt, medical bills, a mortgage or other circumstances. Although you can’t completely ignore personal debt, it need not stop you from becoming an entrepreneur and starting a startup.
Whether you decide to work as a sole proprietor, form an LLC or found a corporation, you can do so with existing personal debt. In fact, there would be very few new businesses if being debt-free was a pre-condition!
How Personal Debt Can Affect Your New Startup, and How to Work Around It
Personal debt, especially if you also have a low credit score, can put you out of the running for certain types of business loans. Still, you’re likely to have alternative lending options that may help you get your business going, like equipment financing, for example.
Personal debt, with a minimal or poor credit history, can make your potential investors think twice about funding or investing in your new company. However, if you’ve done your advance market research, and your business idea has potential, that can overcome any negatives of personal debt. You may have to pitch to several different investors to get funding or combine strategies by considering alternative lenders.
Personal debt can make lenders (especially traditional banks) nervous, thinking your business profits may go to paying off personal debt, instead of re-investing in your business. If you re-direct early business profits to your personal debt payoff, you can put your new business at risk. You may need to emphasize re-investing so that you’ll get a long term payoff from a successful business. If you can raise funds via friends and family, their trust might help you get funding without traditional loan constraints. You should also talk to alternative lending institutions about flexible funding options.
A Successful New Business Can Change Your Life
The fact is, most of us carry debt–and we owe it to ourselves (and society) to create a vibrant economy. You can’t have a healthy economy if no new businesses are being created. So don’t let personal debt hold you back from your dreams, or from going ahead with viable business ideas.
Learn more about alternative funding options that don’t require you to be a debt-free borrower. Contact Sudden Rivers Capital Corp today.