Can I Be An Entrepreneur Even Though I've Got Debts?
An entrepreneur seeks only one goal: Success. Regardless of what your business delivers, the primary purpose of starting a company is to make money. Ultimately, without profits, your business can’t survive. While it doesn’t mean that every entrepreneur wishes to get rich, you’d be hard-pressed to find anyone who doesn’t want to improve their financial situation in the process.
Financial success for your company, however, doesn’t mean that you, as a person, have to establish your financial stability to launch your business. Indeed, many aspiring entrepreneurs assume that their personal finances will impact their companies’ viability and growth. In reality, no rule says you can’t be an entrepreneur if you’re in debt. Personal debt makes it hard to finance your business using your savings. However, it doesn’t stop you from building a successful enterprise. Here is why personal debt doesn’t affect your commercial growth.
Separate commercial & personal investments
First of all, your business and your personal finances are two separate entities. For sole traders who tend to operate with one bank account, it can be hard to distinguish between business and personal costs. Therefore, it can be tempting to use your business to finance individual needs. However, this approach could put your enterprise at risk. Instead, accounting and budget experts recommend financing options that can meet your personal needs without impacting your business finances. For instance, financing programs such as New Roads Auto Loans are specifically tailored for people with a bad credit history. Moneylenders do not need to use your business as collateral.
Most states expect companies to have a business bank account. As a result, commercial and individual financial books are separate in the eyes of the law and the tax regulation. However, it can be a good idea even for sole traders and freelancers to open a separate account for their trading activities.
Keep running costs low to avoid self-financing
Keeping your business running costs low is a no-brainer. For entrepreneurs who struggle to separate personal and business budgets, it’s an essential step that will avoid putting your personal finances at risk. It’s easy to consider growing your profits by letting your personal savings pay for commercial needs. But in the long term, you could drag your bank account in the red. Instead, new businesses need a frugal approach to management, from property costs to growth investment. Admittedly, it is tempting to throw money at your company to help it grow. However, you can’t rely solely on self-financing to create profit. It’s a counterproductive approach that aggravates personal debts.
Your business plan is about your business profit
Unlocking money for a new business can be challenging. However, when you apply for a business loan, money lenders do not take your personal financial history into account. Commercial loan applications are decided on your business profitability, as it is a loan that the business, rather than the individual, takes. Therefore, your business plan will establish your success path and chances. As a result, personal debt doesn’t affect your commercial loan, even when some business banks check your credit score.
Do personal debts affect your business? In theory, the answer is no. However, in practice, bad habits that lead to debts in your personal life can find their way through your business management style. Building a successful company when you’ve got debt requires strict separation of professional and personal finances.