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    9 Replies Latest reply on Aug 26, 2009 5:54 AM by SeniorLiving

    Using part of a biz loan for personal use?

    JDecker Wayfarer

      Is it a good idea to ask for how much you expect to need for personal expenses, ie: rent, bills, etc.. as part of a business loan? Example: If I project to need $50,000 for a full year to be able to pay monthly bills and for personal needs, should I ask for $100,000 loan (say $50,000 for the business, $50,000 for yearly personal salary)

      I'm not sure if I'll be able to work a full-time job and start my business fulltime, and being 22 and not born into a wealthy family, I don't have any personal savings to be able to lean on while I get my business started.

      Is this a good idea, or am I setting myself up to fail by asking for a larger loan?
        • Re: Using part of a biz loan for personal use?
          LUCKIEST Guide
          Tell us more. Where are you located?? and do you have a business in mind??
          How soon will you need this loan??
          Do you have a Business Plan.It is one of the first items a lender will want to see.
          Increasing the loan will increase the monthly payments.
          Go to Members page and add a few words about you and your business plans.
          LUCKIEST
            • Re: Using part of a biz loan for personal use?
              JDecker Wayfarer
              I'm in Minnesota, and my business will be an online paintball retailer. I'm looking to open up by June, so the loan will be needed by then. I do have a business plan, and I'm close to finishing that up.
                • Re: Using part of a biz loan for personal use?
                  DomainDiva Ranger

                  I am doing a tech start up and am happy to say that I have not used one penny from my investor for any personal expenses. I am still working full time and will continue to do so until I absolutely must...having decided to cross that bridge when I come to it instead of worrying about it....

                  Since you will be retailing online I strongly encourge you to get a job to pay expenses...or better yet...move home if thats an option and work part time for rent and food money and transportation money.

                  If one of my kids needed to move home because they were starting a business the door is open...good luck.
                    • Re: Using part of a biz loan for personal use?
                      JDecker Wayfarer
                      Moving home simply isn't an option, it's not that I don't want to, the agreement between my parents and I were that when I'm out, I'm out.

                      I figured keeping a full-time job would be needed, my issue is that that's about 40 hours or so per week that I can't devote to my business, and I want to devote all my energy and time to make this a success.
                • Re: Using part of a biz loan for personal use?
                  Lighthouse24 Ranger

                  You'd be "setting yourself up to fail" at either extreme.

                  When you leave a regular job to become self-employed full time, you still have to eat and pay your bills -- so if your business plan, personal assets, and loan request indicate that you're not allowing enough money to do that, the lender will turn you down.

                  On the other hand, if you ask for $50K to pay your first year personal expenses, the lender will probably still turn you down. I'm not passing any judgment here, but my guess is that almost every person who actually owns and operates a business in this community could get by on less than that if he/she had to -- the majority probably get by on less than that NOW (according to USA Business Statistics published by the government in 2005, the average gross income for the owner of a one-person business was $37,058.15).

                  In my experience, when we as business owners ask someone else for money, they generally want to know how much of our own heart, soul, resources, and lifestyle we're willing to commit (and honestly, that doesn't ever change -- whether you're asking a family member for $2,000 or an angel group for $2 million). So to increase the chance of getting the funds you need, make sure your business plan and loan request present that message.

                  I hope this helps. Best wishes.
                    • Re: Using part of a biz loan for personal use?
                      AppleGraphics Adventurer
                      I think we all understand your desire to pend all your time on your business to make sure it will flourish. However, doubling your business loan to cover you personal expenses is not a good idea. Lighthouse24 pointed are some very good points. Lenders want to be able to see the passion you have for your business and be willing to sacrifice some comforts will be a must especially in the earlier years of your startup. Living on 50k may seem living cheap to you but I guarantee you can survive on much less and probably will have to.

                      When it was suggested that you get a job to help support yourself during the initial startup I don't think anyone was insisting that it had to be a full time job. If you can find a decent paying part time job you will be able take in a little money while still having the time to work on your startup. I believe the average entrepreneur works around 60 hours a week. If you you actually worked those hours plus 20 hours a week at a part time job you would be working 80 hours a week. I know that number can be intimidating but it honestly is not as bad as insurmountable as it sounds. After saying all of that building in a little (I do mean little) amount of money to cover personal expenses in emergency is not a horrible idea.

                      I hope this helps and good luck with your business.
                    • Re: Using part of a biz loan for personal use?
                      Uncle Leon Tracker
                      Decker, I'm going to be "contrary" to some of the other posts concerning this. But, I believe, perhaps there's a misunderstanding. Of course, when you have a business, you use business funds for your personal needs. BUT YOU MUST DO IT CLEANLY. Simply draw a fixed and reasonable salary on a regular, fixed schedule, like your other employees.

                      Even when applying for funds through SBA; it's understood that you need money for business expenses, includint a reasonable salary. This salary figure should be built into the Financial plan portion of your business plan.

                      Your lending institution woukld not consider that you would have planned very well if you hadn't accounted for personal income from your business.

                      If you believe that your new business can't afford to pay you a salary, and if you don't need the funds from the business; I strongly that you draw a salary anyhow. Then, if necessary, 'lend" money back to your business. That is a clean and well accounted way of keeping track of personal funds invested.
                      • Re: Using part of a biz loan for personal use?
                        SeniorLiving Wayfarer
                        I started of a facility for assisted living of senior citizens by taking huge loans. After operations began we realised that we were going to need more loans. I went back for more and got it easily. Part of the reason was that I had lived like a churchmouse for a year and half after receiving the first tranche. Your investors should believe in you.