Raising Dough by Elizabeth Ü

Author:Elizabeth Ü
Language: eng
Format: epub
ISBN: 9781603584296
Publisher: Chelsea Green Publishing
Published: 2013-05-29T00:00:00+00:00

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Investing in Your Own Business:

Sources of Personal Debt

This chapter covers sources of personal debt that you can use to finance your business. These options include personal loans and lines of credit (including mortgages and other debt that use your home as collateral), credit cards, and peer-to-peer lending. Chances are high that you will be your venture’s first investor, both in terms of the time and energy you commit and in terms of cash that you bring to the table. If you have invested your own money into your business, other potential lenders, including your friends, family, other individuals, and lending institutions, will be far more likely to do the same. They might also be more interested in investing in something that they can see is already under way, and it will take some cash to get to that point: your cash. If you’ve been poking around to see about getting a loan for a new business from a bank, you have probably already discovered that very few commercial lenders will give a loan to businesses without a track record, period. So you’ll need to look into other means of raising money in the beginning.

If you have good credit, there are many more options for obtaining personal debt than there are business credit options for new businesses. With that in mind, this chapter is about financing your business in a somewhat roundabout way: by borrowing money or obtaining credit for yourself rather than your business, then using that credit for business purposes. (As we learned in chapter 3 you and your business are separate entities, except in the case when you choose to operate as a sole proprietorship.) This might be the way to go in your situation if you have a good credit rating yourself and one or more of the following are true:

• Your business is just getting started and therefore cannot qualify for loans from banks or other business lenders because it has not yet built a credit record of its own.

• You would prefer to work solo rather than put a lot of effort into rallying your community to support your fundraising efforts.

• There are other reasons why you cannot or don’t want to raise money using other methods (for instance, you might not want to sell equity in the company under any circumstances).

• You are not afraid of putting your personal credit rating or personal assets at risk.

While the assumption is that your ultimate goal is to use money you find from the following sources for business purposes, don’t forget the lesson from chapter 4: keep your personal finances separate from your business finances. Also remember that you personally, not the business, are responsible for repaying debts described in this chapter. This means that both your personal credit score and any personal property that you have offered as collateral are at stake if you fail to repay these debts. Finally, make sure that you properly account for all transactions involving personal debt. Consider any monies “raised”

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