Bankroll Your Business While in Personal Debt

Depending on where you are in your life and your career, you might be facing a little — or a lot — of personal debt. Many would-be entrepreneurs owe money on credit cards, student loans, mortgages, cars or all of the above, and these heavy outstanding balances could put their dreams of business ownership on hold.

Quitting your day job to start a business when you’re thousands of dollars in the red is probably ill-advised, but carrying debt shouldn’t prevent you from getting your business going. Although it’s not an easy path, it is certainly possible to become an entrepreneur under tough financial circumstances.

If you’re looking to start a business while you’re in debt, here are a few smart steps to help you minimize startup expenses and keep your cash flow steady.

Explore your financing options
If you’re carrying a lot of personal debt, your monthly cash flow is probably not optimal for funding a business. There are a lot of options for business owners in your position — crowdfunding, alternative lenders, credit-card financing, etc. — but each choice comes with pros and cons, and you should be thoroughly understand what’s involved before moving ahead.

For example, Ethan Senturia, the CEO of business financing provider Dealstruck, said affordable financing options (i.e., loans and lines of credit with a lower interest rate) almost always requires a personal guarantee from the business owner.

“Even though you can get a business loan with a heavy personal debt load, most small business lenders will ask that you personally guarantee repayment of the loan in case your business can’t make the payment,” Senturia said. “This could add a heavier burden on your already heavy debt obligations, and could add stress to your personal life. Financing that doesn’t require a personal guarantee … is very expensive and can significantly strain your new business.”

You can also probably secure additional personal credit cards for your business, but Senturia doesn’t recommended this, as these cards will not help you build business credit, and will instead hurt your personal credit.