Taking On Debt

As you can see there is a wide diversity of opinion about taking on debt to start a business. The truth is that you might be able to use asset financing to start a company, but it is very likely that in order to grow the company you may have to borrow money at some point down the road.  

Sonya, our “magic-magnets” tycoon, had some good success in marketing her initial samples. Like most young people, she was very encouraged and anxious to expand. This time she needed more capital than before, but she had no credit rating to get a bank loan. Considering other options, Sonya talked her father, who had been watching her hard work and progress, into giving her a loan to mass-produce her product.

Ever since the Industrial Revolution, the goal of almost every American entrepreneur has been to find the magic formula for success and mass produce it. Sonya capitalized on referrals from her previous customers, and soon had sold 10,000 magnets with positive, life-saving messages to a network of physicians.

“I am very inventive,” says Sonya.  But she adds, “I don’t really like borrowing money because I don’t like the feeling of owing somebody, even if it’s my Dad.” At the end of the day, she decided it is totally appropriate to seek business loans from family as part of start-up financing. But she adds one condition;  she feels teenagers who ask family members for loans should first “demonstrate their commitment by raising money through their own efforts, such as garage sales, car washing, lawn mowing, or the like.”