Small Businesses, Loans and Endless Debt

You may find this hard to believe, but I have never taken out of loan for any of my businesses.

You may find this even harder to believe, but I never use any of my credit cards.

You may later realize why this is so smart, but I pay cash for everything.

Today's economic crises stem from the overextension of bank credit and the overexcitement to make some extra cash by lending out as much money as possible. Banks did this only to later find out that doing so was more than risky... it was stupid.

Lesson learned?

I don't think so.

If only it's that simple.

The current recession has hindered many people from receiving the loans that they think they need so badly. According to a survey conducted by American Express, one in five small businesses are unable to access the capital needed in order to effectively operate their business. Lacking funds, small business owners have tapped into their personal savings accounts and personal credit. Nearly 42% of small business owners rely on their credit cards for capital.

If you read in between the lines here, you will understand that this is saying that most businesses operate in debt. Unfortunately, if things aren't going well, business owners are willing to do everything possible to keep their dreams alive.

While I feel for them, over $100,000 in personal debt is not a good place to end up when you realize that you lost the battle.

And this example just pertains to already operating businesses.

If you are trying to launch your own startup and looking to take it to the next level, do me a favor and don't take out a loan or any type of debt. Bootstrapping, working other jobs, and having patience are really the ingredients to small business success and longevity.

After all, taking out a loan puts a timeline on your business in the form of monthly paybacks. Who would want that type of pressure all the time?

If your operation isn't profitable using this method within the first year, you need to reassess the business and change some things around.

That's how confident I am about not going into debt.