How to Start a Business Venture Debt-Free
Tip #1. Slow down and save first
“Good debt is a loan that has the potential to increase your net worth. Bad debt involves borrowing money to purchase depreciating assets.” — Investopedia
There is no such thing as good debt. People like to say small business loans, student loans and house loans are ‘good.’ People are wrong.
The average US small business owes $195,000, and a quick search shows business loans anywhere between 6% and 35%. Over 10 years, the payback for a loan of this type would be somewhere between $260k and $700k.
Leveraged companies, I’ll hand it to you guys — you must have balls of steel to take on that kind of risk. And this is the lower end of the debt spectrum.
Debt should be a last resort, not the first.
Here’s the thing. If your new business venture is online — say online writing, building websites, or graphic design — your startup costs will be relatively low. All it’s going to take is a few hundred dollars for some software, maybe some advertising or perhaps a couple of thousand if you’re throwing in a new laptop.
But what if your business dream is something more physically concrete? Something with a physical presence like a store, a company that requires a large stock holding…
