Discussion in 'Entrepreneurship' started by dealmaker, Jun 26, 2018.
The topic of course is interesting .. only I am afraid to take loans.
SBA loans are pretty scary because they require a personal guarantee of the company owners. I would only take one on something where it was covering something pretty guaranteed, like the float on invoicing to very creditworthy customers. If you can get venture money it's far more suited to starting a company in a space where the statistics aren't on your side. If you aren't successful, worst case you can go back to your 9-5 no financially worse off than when you left and far richer for the experience. If you had taken an SBA loan you may spend years paying it off in the event the business fails and you are significantly worse off financially.
I don’t know about you but I had significant unlimited personal guarantees when I bought my first business (from loans from a commercial bank). After a few years, they are still significant but limited.
It’s common for banks to require this.
For sure. Common but no less terrifying for being so! If you're somewhat established and you're using the loans for something other than actually starting the company I can see how they wouldn't be as scary. For example if you're buying used trucks and know you could sell them for close to what you bought them for, or maybe some kind of pretty fungible inventory I guess. For actually starting a company, I can't imagine doing it. Especially given that VC/Angel money is free, no strings attached. In fact it's not uncommon for an investor to reinvest in a team after a failure if it was due to circumstances beyond their control with the idea that they know them well and they already paid tuition for a lot of lessons learned the first time around.
I agree it’s a lot more scary if those guarantees are backing cash flows or an intangible idea. It’s less scary when they are backing steel and dirt.
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