Many people start a new business in hopes that it will get them out of debt. This can work. But it is dangerous. There are a lot of risky financial moves you can make that have a chance of working. After all, people do win the lottery and make those jackpot bells ring in Vegas. It literally happens everyday and several times a day all over the world. If it happened for them, it could happen for you. But rolling the dice with your finances is not a plan; it is a cry for help. Consider this an intervention.
Your money is too valuable to risk on questionable strategies, especially when you are on a budget. It takes money to make money. That is a vicious circle that offers no real help. It is the kind of advice provided by people who have plenty of money already and never had to start from a position of personal debt. Yet as frustrating as it is, you really do have to address that debt before you can flip over the OPEN sign. Here are a few reasons why, and some advice on how to make it happen:
Debt Consolidation
This is what happens when you visit a debt consolidation consultant:
1. You compile all your bills representing those high-interest, unsecured debts such as credit cards, loans, and the like.
2. A professional totals everything up and crafts a loan that covers the entire pile of debt at a lower interest rate than what you were paying.
3. In the words of one of the most famous advertisem*nts in history, there is no step three.
If you just want to invent another step, you count your savings and use them to pay off your debt a little faster. Or, you could save those savings and pour them into an account just for your business when it is ready to open.
Unlike other loans, a consolidation loan is intended and designed to help get you out of debt rather than to get you further into trouble. It should not be confused with something like a payday loan or a title loan. Those are the types of moves that got you into the situation you are in right now. Just remember that not all loans are created equally. So before applying for that huge business loan, try setting up the consolidation loan first.
You Have To Start With A Budget
It seems trivially obvious that you cannot grow your business on a budget if you do not have a budget in the first place. You can’t really initiate a useful budget until you get your head above water. Until you get out of debt, your budget is essentially debt service and racing to beat the disconnection notices. Setting aside $1,000 for business cash flow is out of the question in a situation like that.
If you start your business while you are buried under a ton of personal debt, you are likely to borrow from your business to service your debt, thus saddling your business with debt. Rather than the business solving your debt problem, Your debt problem will drag your business down. This will not be a concern if you settle your debt before making your grand opening.
You Have Something To Prove To Yourself
If you want to borrow money in the form of a business loan, you will have to prove you are creditworthy to the lenders. You also have something to prove to yourself. You don’t have to be ashamed of your debt. It happens to the best of us. But you have to be realistic about the fact that you have some changes to make with regard to how you think of finances. You want to be sure you have made all the right adjustments because if you don’t, you will bring the same financially destructive practices to your business. If you can’t deal with your personal debt, there is no way you will be able to deal with a much larger business debt.
Ditch Debt
Using debt consolidation along with living lean, you can start fresh with a sensible budget and prove to yourself and your creditors that you can handle a large business that will help you achieve your dreams. Ditch your debt starting now!
