29
Apr

Is is smart to live of a loan while you build your business?

Archived in the category: grow your business

I am in the process of building my business ventures that will emcompass my life over the next few years. I am thinking of making sure the loan will cover all of my expenses (basic home expenses ok 24k) while I work and grow for the first year.Good idea or bad idea?

No.

You should save enough to cover your expenses for at least a year until the business starts producing money. The reality if the business fails, you still have to pay back the loan without any money coming in. Running a new business is challenging. Regardless of what you hear about all the resources that are out there, they all want their money.

Cheers and good luck!

Posted by: admin - 2 Comments

2 comments for “Is is smart to live of a loan while you build your business?”

.1
Brother Otter

Highly likely that your new business will be operating in the red for a couple years, so making sure you have enough to live on is important. If you can set things up so you only draw money when it’s needed would be best – less overall debt and interest to have to pay back.
References :

April 29th, 2011 at 2:26 pm
.2
sfuller94

What you are talking about is operating capital. Not only will you need to have enough capital to pay yourself a paycheck but you will need to keep the lights on, the phone working and you will need an internet connection. Then there is always a place to conduct business! You’ll need space!

I suggest you create a business plan that includes all of the operating capital and startup expenses you will need.

Then you shop the business plan around to investors and or banks. Banks are considered private equity and may loan you enough money to get started as long as you have a large stake in the business and have a very good business plan. Below are a couple of websites to visit that will help you get started with a business plan. The business plan process will make you ask the hard questions, like viability of my idea and what about sustaining. How will I keep my idea growing? Am I waiting on a piece of technology to come along? What if I don’t get the sales expected? How will I advertise? What are the projected success rates of advertising in this manner? Remember to ask the HARD questions! Test your idea!

As well, this type of question would be better fielded in the Small Business group. Good Luck and feel free to email me if you have any further questions. My email is in my profile.
References :
http://www.sba.gov
http://www.startupventuretoolbox.com

April 29th, 2011 at 3:05 pm

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