Should You Start A Business When You’re In Debt?

beggers December 6, 2017 0
Should You Start A Business When You’re In Debt?

If you have debt worries, you will be well aware that of one of the central tenets that can help you is to make more money. The more you earn, the more surplus cash you will have to put towards your debt problems.

Sadly, a route to making more money is not always easy. If you have maxed out your hours at your current job, then you are quickly short of options. You may consider the option of a second job, but this can be prohibitive if you would have to arrange for costly childcare that would eat into any extra money you earned. So what can you do?

It’s at this point that many people turn to the idea of starting their own business.

There’s good reason to consider this option. When you start a business, you can be flexible with the time you dedicate to the endeavor. You can spend a few hours working when the kids have gone to bed, for example– starting your own business is a great idea for busy parents… for the most part.

The Big Issue

The biggest issue you will face is the funding question. There is no business you can start that doesn’t require some element of startup funding. To start any business, you will need capital. This is where the idea of starting a business to pay off debt becomes very tricky.

Should you take on more debt so you can start a business? The idea itself sounds worrying, but here are a few ways you can make it work…

Separate Your Finances

You have to make a clean cut between the finances of the business and your personal finances. This has to be absolute; no money is transferred between the two unless it is properly accounted for.

When you have a clean set of business accounts, then you can go to go to and consider the funding options. With a clean separation of accounts, you can be safe in the knowledge that you haven’t taken on more debt– the business has, and you and your business are now two, separate, independent entities. This is the only way in which you should take on debt to fund your business; you don’t take the debt on personally, the business does.

Start Small

It’s important to be parsimonious when it comes to borrowing to fund your business. You have to minimize your outgoings so that you are borrowing the least amount of money you can, and only spending money on things you know that your business needs. You may want to read through the advice on to judge areas where you can cut back on startup spending.

Keep A Contingency

You may face a time when one of your areas of finance is struggling; it may be your personal budget is feeling squeezed, or your business finances are going through a cashflow crisis. It’s at this point that you can land yourself in a world of trouble, by thinking: “why not borrow from one to ease the issues with the other?”

When this line is crossed, you have lost the oh-so-vital separation of the two sets of financial affairs. To avoid this being necessary, you have to build contingency savings for both your business and personal finances. These contingencies should remain untouched, only called upon in times of dire need.

In Conclusion

If you can keep the tips above in mind, then yes, you can start a business when you’re in debt— but you have to be very, very careful with how you do it. Good luck.

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