There are times when debt is unavoidable. Whether that debt involves student loans, cars, credit cards, or mortgages, the outstanding balance could keep the owners of the debt from ever pursuing their dreams—or, at least, push back that pursuit.
It is not advisable to quit your full-time job when you owe a lot of money. However, having debt should not stop you from starting your own company. Although the road to success will be rough and full of challenges, it is possible to become a successful owner even when you have financial burdens and obligations.
The discussion that follows presents some tips to help you start a business, even when you are financially still in the red. These tips can minimize your startup costs and help maintain a good cash flow.
Look at Financial Options
Cash flow will be one of the problems you are going to face when you are in debt. However, you can look at the alternative financing options available to people in the same circumstances as you. Some of these options include credit card financing, crowdfunding, and alternative lenders, just to name a few.
Each option has its advantages and disadvantages. You should research each option thoroughly so that you know what you’re getting yourself into before moving to the next step.
One option you can consider is secured credit cards for official company transactions. However, experts don’t recommend this option because this line of credit will not help build credit and will damage your own credit rating.
If you decide to take out another loan, look for one that is revenue-based. Lenders will look into your credit score and revenue, instead of just your total debt. The downside is that they are expensive and have strict requirements in order to qualify for them.
Lower Your Overhead Costs
You should also consider reducing your own expenses to improve your cash flow. By lowering your overhead costs, you will have more money to put into your organization. You should prepare yourself to live day-to-day as you wait for your venture to become a success.
To get more savings, you should also consider consolidating your credit cards. Your monthly payments to the card company make up most of your monthly budget. If you pay only the minimum amount, you are spending a lot on interest alone.
Consolidating your credit card into a personal loan will lower your monthly installments and interest rate. Additionally, doing so will make repaying them cheaper and faster.
If you are still paying for your college loan, you should consider refinancing it. That way you will pay less monthly and enjoy lower interest rates. However, you should not refinance a college loan if you are going to apply for federal deferment or forgiveness. If you don’t qualify for any federal programs, then you can then choose to refinance your college debt.
Another way to reduce your living conditions is to move to a cheaper area. Living in an expensive apartment means a big chunk of your income goes towards rent each and every month. It will leave you with little cash for your daily needs and wants.
Start Small to Build Up Credit
While your personal debt might not affect your chances of getting another just right loans, it might result in lower capital available to you, and that will be at a higher interest rate. You should consider starting small and be financially sound. That way you can gain access to better funding sources in the future.
Scale down your plan with lower overhead costs. Use the initial funding for the startup, and at the same time, continue to nurture a positive credit history.
Use Cheap Marketing Strategies
Good marketing is an important element of a successful venture. If customers don’t know about your company and the products you have to offer, then how are you going to have any sales?
You can create a website through a free provider and be active on social networks. Join relevant groups on Facebook to find potential customers. You can also start an email marketing campaign to reach your target market.
Look for a Partner
Look for a person, one who might have the money to help establish the firm, who will be willing to finance your venture. More often than not, a partner will require a 50 percent share of the partnership. If you want full control of the company, then you might consider borrowing from a relative or friend.
There are many organizations offering grants to small businesses. You don’t need to repay the grants, and you can use the money to start your firm. Grants will not only provide you with the funding, but they also provide you with free media attention, prestige, and networking opportunities.
To apply for a grant, you need to have a good business plan. You should also be competitive because other entrepreneurs are looking for funding through grants as well. Your grant applications should be made only if you meet all the required qualifications, to avoid immediate rejection. You should also provide a strong pitch in order to have an advantage over others.
Use Free Resources
The local business association is the best way to get free advice on how to run your daily operations. These small associations will give you access to memberships to bigger organizations that can provide you with knowledge and networking opportunities.
You can also go online to research the industry and your target market. Trade magazines and newsletters are also excellent sources of information. The information you gather can prepare you with information about what to expect when running your own venture.
Re-invest Profits into the Business
While it is tempting to use your profits to pay off your personal debt, you should consider growing your business undertaking first. You should put the profits back into the company before you pay off any loans. That way, you will have savings for the future. Once you have achieved a steady income, it is then time to use a portion of the profits to paying down and eventually eliminating your personal debt.
Starting a business when you are still in debt can be difficult, but it is possible. Just make sure you have a flexible plan and look for alternative funding sources. You should not let your personal financial burdens to stop you from achieving your goals.