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Do I Need to Pay Off Personal Debt to Start a Business?
By The BIDaWIZ Team - December 27, 2009
The answer depends on the type of debt you are talking about. If it is a mortgage, there's no need to pay off the debt as long as you believe you will be able to make your monthly mortgage payments based on your income or expected income.
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What if I Have A Lot of Credit Card Debt?
If it is credit card debt or personal loans, it is best to pay them off before you go into business. If your credit card interest payment is 20% per yr or so, that can definitely start to add up and restrict your ability to continually fund your business. Also, it could be difficult to obtain a business loan in the future with credit card debt.
Some Debt Can Be Acceptable
If you don't need a business loan or definitely think you can make strong, consistent income in the business, some debt would be acceptable as long as you stay committed to paying it off over time. The key is to make sure you have a payment plan in place and stick to it.
A Great Startup Business Resource
For more information on startup businesses, visit the Small Business Administration at http://www.sba.gov/. There's a great assessment tool there that will help you gauge whether or not you're ready to start a new business (http://www.sba.gov/assessmenttool/index.html).
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More Corporate Finance Questions?
Your specific situation may not fall under the circumstances detailed above. If so, the Corporate Finance Advisors are Here to Assist.
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