Yes, that is the place to start. They are more likely to loan you money if you are a woman or minority business owner. There are many programs for just that. If you happened to be a woman minority, then you should be in the money fairly quickly. Or if you are zoned on Indian land there is a program just for those businesses.

Great to hear? How did the conversation go, and where are you in the process?

There are programs that do help start-ups and it sounds like your consultant has a handle on the process.

That does sound familiar, Wanderer, and typically contradictory of the banking industry. I still have a lot of reading to do with all the paperwork we got last week, but it sounds as though some banks will lend start-up funds when there is a well-written business plan included. According to our economic development friend, the loans usually go something like 40% government, 50% bank loan, and 10% owner investment.

In the back of my mind I remember hearing over and over, lenders like a three year track record as a great many businesses do not make it that long. Of course, how do you start out as there certainly would not be a three year history. Going on, it always seems the lenders are ready and able to offer funding when you really may not need it.

Thanks, Frank! Tonight, my husband and I are meeting with a friend who has a background with small business development, so I'll let you know what we type of advice we get from her. She has some paperwork for us that details various loan options and she's going to try to steer us in the right direction. It should be interesting!

They would view risky in the sense that this is a start up or does not already have a steady cash flow. If it does, the bank will look likely look at the loan with less risk.

That makes sense. I didn't think it would be as easy as being able to walk away free and clear. I wouldn't necessarily call it very risky - it's a food-based company that already has a large following - but doing something like this can be scary and I am planning for a big failure factor just in case. I don't want to be blindsided in the event we're unsuccessful.

In theory yes. However if this business is risky and the bank doesn't see the fundamentals of the business being able to back the loan, they will likely ask for a personal guarantee of the loan, which you will be on the hook. That is fairly common for small business loans.

FrankN wrote: That is very important to consider John, good point. FRUGALFRAN let me know if you have any additional questions.

Well, we're still in the process of forming the business and we haven't made any solid decisions yet about going with a loan. If we do an LLC and fail, what are our responsibilities as far as repayment of the loan? Can the LLC file bankruptcy and walk away from it with our personal credit intact?

I think that the best place to start with any business venture is with the Small Business Administration. They can shed some light on all of your financial concerns about starting any type of business. I don't know where I would have been without them a few years back.

Thanks For Post

I once funded a small business with some savings, and I approached it the same way I do if I lend money to a friend - can I live with the fact that I may never see it again? If I feel that losing it all still made the decision worthwhile then I go ahead.

In the case of my business I felt that the risk was worth it for the happiness doing something independently gave me. I have no regrets. (Oh and I sold the business for a tidy profit a couple of years in.)

That is very important to consider John, good point. FRUGALFRAN let me know if you have any additional questions.

Thanks Frank, nice points here. When considering not taking out a business loan, I think this also boils down to the type of business that's established.

1. A sole proprietorship, partnership or working as a contractor / individual is less risky with cash, because if this goes bust you will be liable anyway. Your savings will likely be drained to pay these debts.

2. LLC (my personal favorite for new small business) - At least you can separate personal finance risk from your venture. It would be a good idea to take on a loan if this is risky in any way.

3. S-corp, etc. My understanding is that setting up a business with this structure already removes personal relationships, and is good for multiple owners with stakes in the business. It makes sense to keep things 100% apart with personal finances.