#StartupStruggles #SmallBusinessLoans #BusinessFunding #FinancialFreedom
Sorry if the title is a bit vague. I’ve seen this question asked and the answers always vary wildly.
I’d very much like to start my own business, but I am totally in the dark when it comes to the startup/funding process. I know you can get a business loan to yourself, or form an LLC and get the loan in that “name” to protect you from liability.
## The Challenge: No Collateral, No Problem
But I know that banks (understandably) won’t give out a loan without some sort of collateral – like your house, or your car – so if the business doesn’t work out and you go bankrupt, then they’ll be able to seize those assets to get their money back.
### Solution 1: Consider Alternative Funding Options
However, what do you do when you don’t have a house, or a car, or any savings or anything of value? I know a lot of younger people are probably in this position, most people my age can’t afford a house and many go without a car as well. Is it just not possible to get a loan to start a business in that case? So those loans are only available to those with assets valuable enough to cover the loan if it folds?
### Solution 2: Seek Out Microloans or Peer-to-Peer Lending Platforms
I’ve read lots of stories of serial entrepreneurs who start a company, then it goes bankrupt, so they start another company which also goes bankrupt, then they start another company which is successful and makes them lots of money. My question is – how? How are they not financially ruined after the failure of their first company, and get more loans to try again? Are all of these people wealthy and/or connected and just continually borrow the money from friends and family? None of them came from humbler backgrounds?
### Solution 3: Build a Strong Network and Seek Mentorship
In my case, I’d love to start a business but I don’t have enough money to fund it myself, and I don’t have any assets of any real value. If I were to draw up a business plan and take out a loan, then the worst case scenario happens and for whatever reason at some point my company goes under, then I’d be financially devastated. I’d owe that money back to the bank, and would spend the rest of my life paying it off in increments, probably drowning in the interest. As far as I know it’s not as simple as “declare bankruptcy and the debt goes away”. And even if it was, and the debt was forgiven, my credit would be in shambles and I’d never be able to take out another loan.
### Solution 4: Embrace Failure as a Learning Opportunity
So ultimately my question is, how would someone like myself get the funding necessary to start a business, and not be ruined if the business doesn’t work out? Is it simply not possible to do this unless you’re already wealthy and can afford to pay off large debts if things go south? It just seems like starting a business is terrifying, and you have one chance, and if you shoot for the moon and fail, then you’re in debt for life. Is that accurate?
Thanks for any insight!🌟🚀🌈
In conclusion, while the road to starting a business without collateral may seem daunting, it is indeed possible with the right approach and mindset. Explore alternative funding options, build a strong support network, and view failure as a stepping stone towards success. Remember, every successful entrepreneur has faced setbacks and challenges along the way. Stay determined, keep learning, and never be afraid to pursue your dreams. #DreamBig #Entrepreneurship #NeverGiveUp
Typically you’ll get a small business loan if the business plan is good/feasible enough.
If the business fails, the money was in the business’s name, not yours. So if you have another business plan that is feasible, you could get another loan.
That being said, lenders typically want to see that you have enough of your own money already in the venture (“skin in the game”)
And they’ll also see your previous history which includes credit score, bankruptcies, etc.
If a bank writes a business loan that fails, they just write it off and move onto the next. It’s part of doing business
In my country there are a lot of government programs that help young businesses and new entrepreneurs. An other way is to start small build with what ever money you have and than get investors. But the second way is difficult and for some types of companies it is impossible.
>However, what do you do when you don’t have a house, or a car, or any savings or anything of value? I know a lot of younger people are probably in this position, most people my age can’t afford a house and many go without a car as well. Is it just not possible to get a loan to start a business in that case? So those loans are only available to those with assets valuable enough to cover the loan if it folds?
If the loan value is low enough you can probably convince a bank to give you a loan with just a compelling business case. But this will probably be hard. Most ppl will raise money from friends and family for seed capital.
Banks will often collateralize the loan with the assets you wish to purchase (equipment say). Banks don’t love depreciating assets as their only collateral, but it is collateral.
>I’ve read lots of stories of serial entrepreneurs who start a company, then it goes bankrupt, so they start another company which also goes bankrupt, then they start another company which is successful and makes them lots of money. My question is – how? How are they not financially ruined after the failure of their first company, and get more loans to try again? Are all of these people wealthy and/or connected and just continually borrow the money from friends and family? None of them came from humbler backgrounds?
Well they probably are temporarily financially ruined. But they seem to have good ideas, the connections to get in front of investors, and the sales skills to get funding. Most VCs are investing in ownership teams as much as business plans and will back multiple ventures for teams they think are talented. Connections in this sense are not necessarily familial, they could be institutional as in they went to Berkeley or Stanford where VCs regularly look for early stage companies to invest in.
>In my case, I’d love to start a business but I don’t have enough money to fund it myself, and I don’t have any assets of any real value. If I were to draw up a business plan and take out a loan, then the worst case scenario happens and for whatever reason at some point my company goes under, then I’d be financially devastated. I’d owe that money back to the bank, and would spend the rest of my life paying it off in increments, probably drowning in the interest. As far as I know it’s not as simple as “declare bankruptcy and the debt goes away”. And even if it was, and the debt was forgiven, my credit would be in shambles and I’d never be able to take out another loan.
That is generally the risk of starting a business using a bunch of other ppl’s money yes. Though your credit would probably only be ruined for 7-10 years, not forever. You are correct about bankruptcy in that it is complicated and not guaranteed to fully erase the debt (especially if there is a personal guarantee, which most lenders want for new business loans).
>So ultimately my question is, how would someone like myself get the funding necessary to start a business, and not be ruined if the business doesn’t work out?
How small can you start? Most businesses start very small and grow with profits reinvested into the business. If you work out the business plan to see the minimum amount of money needed to be viable you might find it’s not that large a sum. Maybe you can fundraise it, maybe you can save that amount yourself, maybe you can convince a bank to loan an LLC a small sum without a personal guarantee. Then when you grow and need expansion capital it will be easier to show a viable business model and convince somebody to lend to you without a personal guarantee.
I know ppl who started decently lucrative service businesses with $800 and two laptops.