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Entrepreneurs: Learn Why a Debt-Filled Past Can Seriously Affect Your Growth Plans

Posted By:  |  January 23, 2014  |  0 Comment(s)

entrepreneurs and personal debt

The average household debt has increased dramatically in the last three decades. With the cost of living on the rise, minimum wage stalled, and a cloud of uncertainty surrounding the job market, it’s no wonder people are having trouble. Added to all of this, there’s student debt. Based on figures from the Federal Reserve Bank of New York, the amount of 25-year-olds with student debt shot up to 43 percent last year, up from 25 percent in 2003. Unlike mortgage debt and unpaid credit cards, even filing for bankruptcy in the US can’t erase debt from student loans. Even if you’ve successfully paid off your debt, the ensuing negative credit can hinder many future ambitions, and may prove an especially dramatic hindrance for those following the particular career path of entrepreneur.

Why Personal Debt and Being an Entrepreneur Don’t Mix

Lining up funding for small business startups and unproven ideas isn’t easy at the best of times. It becomes substantially more daunting when typical channels for loans and investments — such as banks and loan specialists — are shuttered by debt or bad credit. There are several “solutions” that you may hear about, but many are problematic at best and downright foolhardy at worst. Don’t despair; there is always a way to get past debt and kickstart your new business. You’ve already taken the first step by researching your options. Your future as an entrepreneur could be just around the corner.

Be Wary of “Cure-All” Solutions

You may have heard about some special programs offering business financing to clients with poor credit. Like 0% financing on cars and homes for buyers with bad credit, these schemes are usually too good to be true. Following the financial crisis of 2007-2008, banks have clamped down on all types of credit, and there’s a good reason why legitimate financial institutions will not offer traditional payday loans to people in debt. Loans for small companies have always been scarce, and are commonly only offered to proven entrepreneurs and established business professionals (unless the applicants have an outstanding financial status). Alternative borrowing schemes from smaller vendors usually come with exorbitant fees, interest, and additional risks. Read the fine print and have a financial adviser review these options with you, and you may quickly discover what doctors have professed for years: “cure-all” solutions rarely cure anything.

Looking to Friends and Family for Help

There are other forms of getting past debt and bad credit that are more legitimate. For example, if you’re lucky you may be able to find a business partner or cosigner with good credit. If you take this route, be sure to have a lawyer review an agreement between the two of you, even if you know the cosigner well. You could also ask family and friends to formally invest, offering exceptional interest in consideration of their generosity and the added risk. However, finding anyone who is willing to overlook outstanding debt while funding your new business ventures will be difficult, at best. With these types of arrangements, also consider the dangerous potential for fallout in your personal life. The added emotional strain of working through personal debt and credit issues with added pressure from friends and colleagues is the last thing you need during the overwhelming process of launching a new business venture.

The Advantages of True Debt Relief

There’s only one surefire way to avoid the psychological strain of involving close friends and relatives or the dangerous “fine print” that accompanies debt-friendly and low-credit loan schemes. True debt relief may take time, but it is time well spent if you want a long and prosperous career as an entrepreneur, with payoffs that will extend above and beyond the launch window of your first venture. Consider enlisting the aid of a debt relief specialist to get you back in the black and repair any damaged credit. Agencies in this area have years of expertise helping people like you. You might be turned off by upfront costs or perceived expense (depending on the service that is best for you), but remember that if you pick the right company to do business with they will have your best interests in mind. For settlements, they know that they only return a profit if you get out of debt. Compared to the alternatives, debt relief is almost always a better long-term option. Free from the strain of outstanding bills and bad credit, many doors will open up for you, including specialized loan programs for aspiring entrepreneurs. Back up plans are a must for small-business startups, and with a healthy financial status, you always have more options available.

Being an entrepreneur is one of the bravest, boldest, and most exciting career paths in the world. Don’t quit before you’ve begun because of hang-ups with your personal finances. By seeking debt relief, you will soon be on your way to that crucial first loan and the spark of a brand new business.

We’ve reviewed the best debt relief companies in the industry. They offer free consultations to help you determine your best options. Here are some of our top recommended debt relief companies:

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  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

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